Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

In a recent study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more likely to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab banking institutions secured takeovers through the financial crises. Additionally, the study suggests that state-owned enterprises are more unlikely than non-SOEs in order to make acquisitions during times of high economic policy uncertainty. The the findings suggest that SOEs are more prudent regarding takeovers compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to preserve national interest and mitigate potential financial uncertainty. Moreover, acquisitions during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth impact highlights the potential for SOEs just 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 promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to solidify companies and build regional businesses to be effective at contending on a international scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working earnestly to invite FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract international investors simply because they will contribute to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a substantial part in permitting GCC-based companies to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle hurdles worldwide businesses face in Arab Gulf countries and emerging markets. Companies wanting to enter and grow their presence into the GCC countries face different difficulties, such as for instance cultural differences, unknown regulatory frameworks, and market competition. But, once they acquire local companies or merge with local enterprises, they gain immediate access to regional knowledge and study their local partners. One of the more prominent cases of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as being a strong competitor. Nevertheless, the acquisition not merely eliminated local competition but in addition provided valuable local insights, a client base, plus an already established convenient infrastructure. Furthermore, another notable instance may be the acquisition of a Arab super application, namely a ridesharing business, by the international ride-hailing services provider. The international company obtained a well-established brand name by having a large user base and extensive familiarity with the local transportation market and consumer preferences through the acquisition.