Why M&As in GCC countries are encouraged

Why M&As in GCC countries are encouraged

Blog Article

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

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to consolidate companies and develop local businesses to be effective at compete on a international scale, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working seriously to invite FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors since they will add to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a substantial role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.

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 acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western firms. For example, big Arab finance institutions secured takeovers through the financial crises. Moreover, the research suggests that state-owned enterprises are more unlikely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are related to an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the ones 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 tackle hurdles worldwide companies face in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. Nonetheless, when they buy regional companies or merge with regional enterprises, they gain immediate access to regional knowledge and study their regional partners. The most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised being a strong contender. However, the purchase not merely eliminated regional competition but additionally offered valuable local insights, a customer base, plus an already founded convenient infrastructure. Also, another notable example could be the purchase of a Arab super application, namely a ridesharing company, by an international ride-hailing services provider. The multinational corporation gained a well-established brand name by having a big user base and substantial familiarity with the local transportation market and consumer choices through the acquisition.