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 mainly driven by economic diversification and market expansion.

Strategic mergers and acquisitions are seen as a way to tackle hurdles international companies face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their presence into the GCC countries face different challenges, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. But, once they acquire regional businesses or merge with regional enterprises, they gain instant use of regional knowledge and learn from their regional partners. One of the more prominent examples of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised as a strong contender. However, the purchase not merely removed local competition but in addition offered valuable local insights, a client base, and an already founded convenient infrastructure. Additionally, another notable example may be the purchase of an Arab super application, particularly a ridesharing business, by an worldwide ride-hailing services provider. The international business gained a well-established brand name having a big user base and extensive understanding of the area 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 develop regional companies to be have the capacity to competing on a international level, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to entice FDI by developing a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not only directed to attract international investors since they will add to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play a substantial part in allowing GCC-based companies to achieve 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 authors found that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western firms. For example, large Arab banking institutions secured takeovers during the financial crises. Furthermore, the analysis suggests that state-owned enterprises are less likely than non-SOEs to create acquisitions during times of high economic policy uncertainty. The the findings suggest 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 protect national interest and minimising potential financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Certainly, 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 buying undervalued target businesses.