Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions are effective strategies for multinational companies planning to expand their operations within the Arab Gulf.

In a recently available study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, large Arab financial institutions secured takeovers through the 2008 crises. Additionally, the research demonstrates that state-owned enterprises are not as likely than non-SOEs to produce acquisitions during periods of high economic policy uncertainty. The the findings suggest that SOEs tend to be more prudent regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and minimising potential financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Certainly, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target companies.

Strategic mergers and acquisitions are seen as a way to tackle hurdles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and expand their presence into the GCC countries face various challenges, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, if they buy local companies or merge with regional enterprises, they gain immediate use of local knowledge and learn from their regional partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong contender. But, the purchase not only removed regional competition but additionally offered valuable regional insights, a customer base, plus an already founded convenient infrastructure. Furthermore, another notable instance is the purchase of an Arab super software, specifically a ridesharing company, by the worldwide ride-hailing services provider. The multinational corporation gained a well-established manufacturer by having a large user base and extensive familiarity with the local transportation market and consumer preferences through the purchase.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to consolidate companies and build up regional companies to become capable of compete on a global scale, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives much of the M&A activities in the GCC. GCC countries are working seriously to draw in FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This plan is not merely directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a significant role in enabling GCC-based businesses to get access to international markets and transfer technology and expertise.