Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions are effective approaches for international companies aiming to expand their operations in the Arab Gulf.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various difficulties, such as cultural differences, unfamiliar regulatory frameworks, and market competition. But, if they buy regional businesses or merge with regional enterprises, they gain immediate usage of regional knowledge and study their local partners. One of the most prominent examples of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as being a strong rival. Nonetheless, the acquisition not only removed regional competition but additionally offered valuable local insights, a client base, plus an already founded convenient infrastructure. Moreover, another notable example could be the purchase of an Arab super app, namely a ridesharing business, by an international ride-hailing services provider. The international firm gained a well-established brand name with a big user base and substantial understanding of the local transport market and client choices through the acquisition.

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 inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, big Arab financial institutions secured takeovers through the financial crises. Also, the study suggests that state-owned enterprises are not as likely than non-SOEs to help make acquisitions during times of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and mitigate potential financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are connected with an increase in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target companies.

GCC governments actively encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a method to consolidate companies and build up regional companies to become have the capacity to competing at an a global level, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working seriously to invite FDI by creating a favourable environment and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract foreign investors simply because they will add to economic growth but, more critically, to enable M&A transactions, which in turn will play an important part in allowing GCC-based businesses to gain access to international markets and transfer technology and expertise.