Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to consolidate industries and build regional companies to be have the capacity to competing on a worldwide level, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to draw in FDI by creating a favourable environment and bettering 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 crucially, to enable M&A deals, which in turn will play a significant role in permitting GCC-based businesses to achieve access to international markets and transfer technology and expertise.

In recently published study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, big Arab finance institutions secured acquisitions throughout the 2008 crises. Additionally, the study suggests that state-owned enterprises are less likely than non-SOEs to make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs tend to be more prudent regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and minimising potential financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses encounter in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their presence in the GCC countries face various challenges, such as cultural differences, unfamiliar regulatory frameworks, and market competition. Nevertheless, if they acquire regional businesses or merge with regional enterprises, they gain instant access to regional knowledge and learn from their local partner's sucess. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce company recognised being a strong competitor. However, the purchase not merely eliminated regional competition but in addition provided valuable local insights, a customer base, plus an already established convenient infrastructure. Also, another notable example may be the purchase of an Arab super application, particularly a ridesharing company, by an worldwide ride-hailing services provider. The international corporation gained a well-established brand name having a big user base and considerable understanding of the local transport market and consumer choices through the acquisition.