Exactly why M&As in GCC countries are encouraged

Exactly why M&As in GCC countries are encouraged

Blog Article

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

GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a way to solidify industries and build regional businesses to be effective at compete on a international level, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives much of the M&A activities in the GCC. GCC countries are working seriously to attract FDI by developing a favourable ecosystem and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract international investors because they will contribute to economic growth but, more critically, to enable M&A deals, which in turn will play a substantial role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.

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 inclined to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western firms. For example, large Arab banking institutions secured acquisitions throughout the 2008 crises. Also, the analysis suggests that state-owned enterprises are less likely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs are far more cautious regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are related to 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 people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international businesses face in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various challenges, such as cultural differences, unknown regulatory frameworks, and market competition. But, once they buy local businesses or merge with regional enterprises, they gain instant usage of regional knowledge and learn from their local partners. One of the more prominent cases of effective acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised being a strong competitor. Nevertheless, the acquisition not merely removed local competition but also provided valuable regional insights, a customer base, and an already founded convenient infrastructure. Additionally, another notable example is the purchase of a Arab super application, namely a ridesharing company, by the international ride-hailing services provider. The multinational firm gained a well-established brand with a big user base and substantial knowledge of the area transportation market and consumer choices through the purchase.