Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

Mergers and acquisitions within the GCC are largely driven by economic diversification and market expansion.

GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a method to solidify industries and build up regional companies to be have the capacity to compete at an a international scale, as would Amin Nasser likely tell you. The necessity for financial diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to attract FDI by making a favourable environment and bettering the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors because they will add to economic growth but, more critically, to enable M&A transactions, which in turn will play a significant part in allowing GCC-based businesses to achieve access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle obstacles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their presence into the GCC countries face various problems, such as for instance cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they buy local businesses or merge with regional enterprises, they gain immediate use of local knowledge and learn from their local partners. One of the more prominent examples of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong rival. Nevertheless, the purchase not only removed local competition but additionally provided valuable local insights, a client base, and an already founded convenient infrastructure. Furthermore, another notable example could be the acquisition of a Arab super app, specifically a ridesharing business, by an worldwide ride-hailing services provider. The multinational business gained a well-established brand name having a big user base and extensive familiarity with the local transportation market and consumer choices through the acquisition.

In recently published study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For instance, big Arab finance institutions secured acquisitions throughout the 2008 crises. Furthermore, the study demonstrates that state-owned enterprises are more unlikely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs tend to be more cautious regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and mitigate potential financial instability. Moreover, takeovers during times of high economic policy uncertainty are connected with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced 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 such times by capturing undervalued target businesses.