Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

International businesses wanting to enter GCC markets can overcome regional challenges through M&A transactions.

Strategic mergers and acquisitions are seen as a way to overcome hurdles international businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence within the GCC countries face different difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, when they buy local companies or merge with regional enterprises, they gain instant access to regional knowledge and learn from their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong rival. However, the purchase not merely eliminated local competition but in addition offered valuable local insights, a client base, and an already established convenient infrastructure. Also, another notable instance is the purchase of a Arab super app, specifically a ridesharing business, by an international ride-hailing services provider. The international firm obtained a well-established brand by having a large user base and substantial familiarity with the local transportation market and client choices through the purchase.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to consolidate industries and build regional businesses to become capable of contending at an a worldwide level, as would Amin Nasser likely let you know. The necessity for financial 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 environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors since they will add to economic growth but, more most importantly, to facilitate M&A transactions, which in turn will play a significant role in permitting GCC-based companies to achieve 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 acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab financial institutions secured acquisitions during the financial crises. Moreover, the research demonstrates that state-owned enterprises are not as likely than non-SOEs to help make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs tend to be more prudent regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to preserve national interest and mitigate potential 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 just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.