Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

Strategic alliances and acquisitions offer businesses with several advantages whenever entering unfamiliar markets.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to solidify industries and build up local companies to become have the capacity to compete at an a global scale, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives a lot of the M&A deals into the GCC. GCC countries are working seriously to attract 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 simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in enabling GCC-based businesses to get access to international markets and transfer technology and expertise.

In recently published 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 behaviour of Western firms. For example, large Arab banking institutions secured takeovers throughout the 2008 crises. Additionally, the study shows that state-owned enterprises are not as likely than non-SOEs to make takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth effect is more pronounced 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 capturing undervalued target companies.

Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses attempting to enter and expand their presence in the GCC countries face various challenges, such as cultural distinctions, unknown regulatory frameworks, and market competition. But, if they acquire local businesses or merge with local enterprises, they gain instant use of local knowledge and study their regional partner's sucess. The most prominent cases 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 corporation recognised being a strong competitor. Nevertheless, the purchase not only eliminated regional competition but additionally offered valuable regional insights, a client base, as well as an already established convenient infrastructure. Additionally, another notable instance is the purchase of a Arab super application, specifically a ridesharing company, by an worldwide ride-hailing services provider. The international firm gained a well-established brand having a big user base and substantial understanding of the local transportation market and consumer preferences through the acquisition.