Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Strategic alliances and acquisitions are effective approaches for international companies aiming to expand their presence into the Arab Gulf.

In a recently available study that investigates 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 takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western companies. As an example, large Arab banking institutions secured takeovers during the 2008 crises. Additionally, the study demonstrates that state-owned enterprises are less likely than non-SOEs to produce takeovers during periods of high economic policy uncertainty. The results suggest that SOEs are far more prudent regarding acquisitions 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. Furthermore, takeovers during times of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth effect highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target businesses.

GCC governments actively encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to solidify companies and develop local companies to be effective at compete at an a worldwide scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working earnestly to invite FDI by developing a favourable ecosystem and bettering 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 most importantly, to enable M&A transactions, which in turn will play a significant role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses face in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their reach into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. But, if they buy regional companies or merge with local enterprises, they gain instant use of local knowledge and learn from their local partners. One of the most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only removed regional competition but in addition provided valuable local insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable example could be the purchase of a Arab super software, particularly a ridesharing company, by the worldwide ride-hailing services provider. The international company gained a well-established brand by having a big user base and extensive familiarity with the area transportation market and customer preferences through the acquisition.