Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

In recently published study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab banking institutions secured acquisitions during the 2008 crises. Additionally, the research shows that state-owned enterprises are less likely than non-SOEs to make takeovers during periods of high economic policy uncertainty. The the findings suggest that SOEs are more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to preserve national interest and mitigate prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are connected with an increase in investors' wealth for acquirers, and this wealth effect 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 opportunities in similar times by capturing undervalued target businesses.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach within the GCC countries face various difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they buy local companies or merge with regional enterprises, they gain immediate usage of local knowledge and study their local partner's sucess. One of 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 company recognised as being a strong competitor. But, the acquisition not merely eliminated regional competition but also provided valuable regional insights, a customer base, plus an already established convenient infrastructure. Also, another notable example may be the acquisition of a Arab super app, particularly a ridesharing business, by an international ride-hailing services provider. The multinational firm gained a well-established manufacturer with a big user base and extensive knowledge of the area transportation market and customer choices through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to consolidate companies and build up regional companies to become capable of compete at an a global scale, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working earnestly to draw in FDI by making a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors because they will contribute to economic growth but, more most importantly, to enable M&A deals, which in turn will play a significant part in allowing GCC-based companies to achieve access to international markets and transfer technology and expertise.