Exactly why M&As in GCC countries are encouraged

Exactly why M&As in GCC countries are encouraged

Blog Article

Foreign companies wanting to enter GCC markets can overcome local challenges through M&A activities.

Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence into the GCC countries face various difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. However, once they buy local companies or merge with regional enterprises, they gain immediate usage of local 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 firm recognised as a strong competitor. But, the acquisition not only removed regional competition but also provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Additionally, another notable example may be the purchase of a Arab super app, specifically a ridesharing business, by an international ride-hailing services provider. The multinational firm obtained a well-established brand having a big user base and extensive knowledge of the area transport market and consumer preferences through the acquisition.

GCC governments actively promote mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to consolidate companies and build up local companies to become have the capacity to compete on a global scale, as would Amin Nasser likely inform you. The necessity for economic diversification and market expansion drives much of the M&A activities in the GCC. GCC countries are working earnestly to invite FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract foreign investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play an important role in permitting GCC-based companies to achieve access to international markets and transfer technology and expertise.

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 conduct of Western companies. For instance, big Arab banking institutions secured takeovers throughout the financial crises. Also, the research demonstrates that state-owned enterprises are not as likely than non-SOEs to help make takeovers during periods of high economic policy uncertainty. The results indicate that SOEs are more prudent regarding takeovers when 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 prospective financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.