Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, large Arab finance institutions secured acquisitions throughout the 2008 crises. Furthermore, the research demonstrates that state-owned enterprises are more unlikely than non-SOEs to produce takeovers during periods of high economic policy uncertainty. The results suggest that SOEs are far more prudent regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and mitigate potential financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a method to consolidate industries and build regional businesses to be 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 a lot of the M&A deals in the GCC. GCC countries are working seriously to entice FDI by creating a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors since they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play an important role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their presence within the GCC countries face various problems, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, when they buy regional companies or merge with regional enterprises, they gain immediate access to regional knowledge and study their regional partners. The most prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong rival. But, the purchase not merely eliminated local competition but also provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Moreover, another notable example is the acquisition of a Arab super application, specifically a ridesharing company, by an international ride-hailing services provider. The multinational firm obtained a well-established brand by having a large user base and substantial knowledge of the local transport market and consumer choices through the acquisition.