Exactly why M&As in GCC countries are encouraged

Exactly why M&As in GCC countries are encouraged

Blog Article

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

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses face in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their presence in the GCC countries face various challenges, such as cultural differences, unfamiliar regulatory frameworks, and market competition. However, when they acquire local companies or merge with local enterprises, they gain instant usage of regional knowledge and study their local 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, that the giant e-commerce firm recognised being a strong competitor. Nonetheless, the purchase not only eliminated local competition but in addition provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Furthermore, another notable example could be the purchase of a Arab super application, namely a ridesharing company, by the worldwide ride-hailing services provider. The international business obtained a well-established brand name by having a big user base and substantial understanding of the local transport market and consumer preferences through the acquisition.

In a recent study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more inclined to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For example, large Arab finance institutions secured takeovers throughout the financial crises. Furthermore, the analysis demonstrates that state-owned enterprises are less likely than non-SOEs to make takeovers during times of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and mitigate prospective financial instability. Moreover, takeovers during periods of high economic policy uncertainty are connected with 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 like the people 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 for instance tax breaks and regulatory approval as a method to consolidate companies and build regional companies to become effective at competing at an a international level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to entice FDI by creating a favourable environment and bettering the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors simply because they will contribute to economic growth but, more critically, to facilitate M&A transactions, which in turn will play a substantial role in allowing GCC-based businesses to get access to international markets and transfer technology and expertise.