Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

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

GCC governments actively encourage mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a means to solidify industries and build local businesses to become have the capacity to competing on a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working seriously to attract FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors since they will add to economic growth but, more critically, 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 tackle hurdles worldwide businesses encounter in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their presence within the GCC countries face different difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. However, once they buy local businesses or merge with local enterprises, they gain immediate use of regional knowledge and learn from their local partner's sucess. One of the most prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce company recognised as being a strong contender. Nonetheless, the purchase not only eliminated regional competition but also offered valuable regional insights, a client base, and an already established convenient infrastructure. Also, another notable instance is the acquisition of a Arab super software, namely a ridesharing company, by the worldwide ride-hailing services provider. The multinational business gained a well-established manufacturer with a large user base and substantial familiarity with the local transportation market and client choices through the purchase.

In recently published 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 periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, big Arab finance institutions secured takeovers during the financial crises. Moreover, the research demonstrates that state-owned enterprises are more unlikely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The the findings suggest that SOEs are far more prudent regarding acquisitions in comparison to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and minimising prospective financial uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are connected with a rise 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 opportunities in such times by capturing undervalued target companies.