Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

International businesses wanting to enter GCC markets can overcome regional challenges through M&A transactions.

GCC governments actively promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to solidify industries and develop regional companies to become capable of competing at an a global scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives much of the M&A activities into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract international investors simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence into the GCC countries face different problems, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. But, when they buy regional businesses or merge with regional enterprises, they gain immediate use of regional knowledge and learn from their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce company recognised being a strong rival. Nevertheless, the purchase not merely eliminated regional competition but in addition offered valuable regional insights, a client base, and an already founded convenient infrastructure. Additionally, another notable instance could be the acquisition of an Arab super application, namely a ridesharing company, by the worldwide ride-hailing services provider. The multinational company gained a well-established brand name having a big user base and substantial knowledge of the area transport market and customer preferences through the purchase.

In recently published study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more likely to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western firms. For instance, big Arab banking institutions secured acquisitions during the financial crises. Furthermore, the analysis shows that state-owned enterprises are not as likely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The the findings suggest that SOEs are more prudent regarding acquisitions in comparison to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are related to a rise in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth effect 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 businesses.