Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

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

Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide companies face in Arab Gulf countries and emerging markets. Companies planning to enter and grow their presence in the GCC countries face different problems, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, once they acquire regional businesses or merge with regional enterprises, they gain instant usage of regional knowledge and study their regional partner's sucess. One of the most prominent cases of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong contender. However, the acquisition not only eliminated regional competition but in addition provided valuable regional insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable example is the purchase of a Arab super application, specifically a ridesharing business, by an international ride-hailing services provider. The international firm gained a well-established manufacturer having a big user base and extensive knowledge of the area transport market and consumer preferences through the purchase.

In a recent study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, large Arab banking institutions secured acquisitions during the financial crises. Furthermore, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to help make acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to preserve national interest and minimising prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by buying undervalued target companies.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to solidify industries and build local businesses to be have the capacity to compete on a international scale, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working earnestly to attract 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 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 gain access to international markets and transfer technology and expertise.