Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions provide businesses with several benefits whenever entering unknown markets.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their reach into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. But, if they buy regional companies or merge with local enterprises, they gain instant usage of regional knowledge and study their regional partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the purchase not merely removed regional competition but additionally offered valuable local insights, a customer base, and an already founded convenient infrastructure. Additionally, another notable instance could be the purchase of an Arab super application, namely a ridesharing company, by an worldwide ride-hailing services provider. The international company obtained a well-established brand name with a large user base and considerable familiarity with the area transportation market and customer choices through the acquisition.

In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western companies. For example, big Arab banking institutions secured acquisitions through the 2008 crises. Furthermore, the analysis demonstrates 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 tend to be more cautious regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to preserve national interest and mitigate potential financial uncertainty. Furthermore, acquisitions during times of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target businesses.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to consolidate industries and build local businesses to be have the capacity to contending on a worldwide scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A activities into the GCC. GCC countries are working earnestly to draw in FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a significant part in allowing GCC-based companies to get access to international markets and transfer technology and expertise.