Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Strategic alliances and acquisitions provide companies with many perks whenever entering unfamiliar markets.

In a recent study that examines the connection 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 times of high economic policy uncertainty, which contradicts the conduct of Western firms. For instance, big Arab finance institutions secured acquisitions throughout the financial crises. Moreover, the analysis shows that state-owned enterprises are not as likely than non-SOEs to create takeovers during periods of high economic policy uncertainty. The results indicate that SOEs are more cautious regarding acquisitions 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 instability. Moreover, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact 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 opportunities in such times by capturing undervalued target companies.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a way to solidify companies and develop regional businesses to become have the capacity to compete at an a worldwide level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A activities in the GCC. GCC countries are working earnestly to attract FDI by creating a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract international investors simply because they will add to economic growth but, more critically, to facilitate M&A transactions, which in turn will play a substantial part in enabling GCC-based companies to achieve access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach into the GCC countries face different problems, such as for example cultural differences, unfamiliar regulatory frameworks, and market competition. However, when they acquire local businesses or merge with regional enterprises, they gain immediate access to local knowledge and learn from their local partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only removed regional competition but in addition provided valuable local insights, a customer base, and an already founded convenient infrastructure. Additionally, another notable instance could be the acquisition of an Arab super app, specifically a ridesharing business, by an international ride-hailing services provider. The international company obtained a well-established brand name by having a big user base and extensive knowledge of the area transport market and customer preferences through the acquisition.