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 local challenges through M&A transactions.

Strategic mergers and acquisitions are seen 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 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 study their regional partners. The most prominent cases 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 firm recognised as a strong competitor. However, the acquisition not merely removed local competition but additionally provided valuable local insights, a client base, plus an already established convenient infrastructure. Moreover, another notable instance is the acquisition of a Arab super software, 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 extensive understanding of the area transport market and customer preferences through the purchase.

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to solidify industries and develop local businesses to become capable of competing at an a worldwide scale, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives much of the M&A activities into the GCC. GCC countries are working seriously to attract FDI by creating a favourable environment 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 critically, to enable M&A deals, which in turn will play a substantial role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

In a recently available study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more inclined to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, big Arab financial institutions secured acquisitions during the financial crises. Furthermore, the analysis demonstrates that state-owned enterprises are not as likely than non-SOEs to help make takeovers during periods of high economic policy uncertainty. The the findings suggest that SOEs are far more cautious regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and mitigate prospective financial uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are related to an increase in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target companies.