How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Strategic alliances and acquisitions provide businesses with several advantages when entering unfamiliar markets.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to consolidate companies and develop regional companies to be effective at contending at an a global scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working earnestly to invite FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract foreign investors simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in enabling GCC-based businesses to get access to international markets and transfer technology and expertise.

In a recent study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab financial institutions secured acquisitions during the financial crises. Furthermore, the study shows that state-owned enterprises are less likely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to preserve national interest and mitigate potential financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are related to 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 opportunities in such times by capturing undervalued target businesses.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles worldwide companies encounter in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their reach within the GCC countries face various challenges, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, when they buy regional companies or merge with local enterprises, they gain instant usage of local knowledge and learn from their regional partner's sucess. The most prominent examples of effective acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce corporation recognised as being a strong rival. Nevertheless, the acquisition not merely eliminated local competition but in addition offered valuable local insights, a client base, as well as an already established convenient infrastructure. Also, another notable example is the purchase of an Arab super software, specifically a ridesharing company, by the international ride-hailing services provider. The multinational firm gained a well-established brand with a big user base and extensive familiarity with the area transportation market and consumer preferences through the purchase.