Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Foreign businesses planning to enter GCC markets can overcome local challenges through M&A transactions.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach in the GCC countries face different problems, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they acquire regional businesses or merge with regional enterprises, they gain immediate usage of regional knowledge and learn from their local partner's sucess. One of the most prominent examples of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised as a strong competitor. Nonetheless, the purchase not merely removed local competition but additionally provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Additionally, another notable example is the acquisition of a Arab super software, namely a ridesharing business, by the international ride-hailing services provider. The multinational company gained a well-established brand name with a big user base and considerable knowledge of the local transportation market and client choices through the purchase.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to consolidate industries and build up regional companies to be effective at contending at an a international 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 draw in FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract international investors simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in enabling GCC-based businesses to get access to international markets and transfer technology and expertise.

In recently published study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For instance, big Arab banking institutions secured takeovers throughout the 2008 crises. Also, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs are far more cautious regarding takeovers in comparison 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 prospective financial uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by buying undervalued target businesses.