Exactly why M&As in GCC countries are encouraged

Exactly why M&As in GCC countries are encouraged

Blog Article

Strategic alliances and acquisitions provide companies with several benefits when entering unfamiliar markets.

In recently published study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more likely to make acquisitions during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, big Arab finance institutions secured acquisitions through the 2008 crises. Additionally, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding takeovers 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 minimising prospective financial uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs 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 encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a means to consolidate industries and build up regional businesses to become have the capacity to compete at an a worldwide level, as would Amin Nasser likely tell you. The necessity for financial diversification and market expansion drives a lot of the M&A deals into the GCC. GCC countries are working seriously to bring in FDI by creating a favourable ecosystem and increasing the ease of doing business for international investors. This plan is not merely directed to attract international investors since they will add to economic growth but, more critically, to facilitate M&A transactions, which in turn will play a significant part in enabling GCC-based businesses to achieve access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide companies face in Arab Gulf countries and emerging markets. Companies wanting to enter and grow their reach within the GCC countries face various challenges, such as cultural distinctions, unknown regulatory frameworks, and market competition. Nevertheless, when they acquire regional companies or merge with regional enterprises, they gain immediate usage of regional knowledge and learn from their local partner's sucess. One of the more prominent examples of successful acquisitions in GCC markets is when a heavyweight 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 regional competition but in addition offered valuable local insights, a client base, as well as an already established convenient infrastructure. Furthermore, another notable instance may be the acquisition of a Arab super application, namely a ridesharing business, by an international ride-hailing services provider. The international company obtained a well-established manufacturer having a large user base and considerable understanding of the local transport market and client preferences through the purchase.