Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

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

In recently published study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more inclined to make acquisitions during times of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, big Arab financial institutions secured takeovers during the 2008 crises. Moreover, the study demonstrates that state-owned enterprises are less likely than non-SOEs to produce acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are far more cautious regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and minimising potential financial instability. Moreover, takeovers during periods of high economic policy uncertainty are related to an increase in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.

GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a means to solidify companies and build up regional companies to be effective at competing on a worldwide scale, as would Amin Nasser likely let you know. The need for economic diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working earnestly to draw in FDI by making a favourable environment and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors simply because they will add to economic growth but, more most importantly, to facilitate M&A transactions, which in turn will play an important part in permitting GCC-based companies to get access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international companies face in Arab Gulf countries and emerging markets. Businesses planning to enter and expand their presence within the GCC countries face different problems, such as cultural differences, unfamiliar regulatory frameworks, and market competition. Nonetheless, if they buy local businesses or merge with regional enterprises, they gain instant access to local knowledge and learn from their local partners. One of the more prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong contender. However, the acquisition not only removed local competition but also offered valuable local insights, a customer base, and an already established convenient infrastructure. Moreover, another notable example may be the acquisition of an Arab super app, specifically a ridesharing company, by an international ride-hailing services provider. The multinational corporation gained a well-established brand name with a big user base and considerable knowledge of the area transportation market and consumer preferences through the purchase.