Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

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

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses face in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow 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 usage of regional knowledge and learn from 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 as being a strong rival. But, the acquisition not merely removed regional competition but additionally provided valuable regional insights, a client base, as well as an already founded convenient infrastructure. Moreover, another notable example is the purchase of an Arab super app, namely a ridesharing business, by an worldwide ride-hailing services provider. The international firm gained a well-established manufacturer having a large user base and extensive knowledge of the local transport market and consumer choices through the acquisition.

In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western companies. For example, big Arab banking institutions secured acquisitions through the financial crises. Also, the research shows that state-owned enterprises are more unlikely than non-SOEs to make takeovers during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to preserve national interest and minimising potential financial uncertainty. Moreover, acquisitions during times of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced 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 possibilities in similar times by capturing undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to solidify industries and develop regional companies to be capable of contending on a worldwide scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working earnestly to entice FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors because they will contribute to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a significant part in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.