Why M&As in GCC countries are recommended

Why M&As in GCC countries are recommended

Blog Article

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

In recently published study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, large Arab banking institutions secured acquisitions during the 2008 crises. Also, the research demonstrates that state-owned enterprises are less likely than non-SOEs to create takeovers during times of high economic policy uncertainty. The results indicate that SOEs are more cautious regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to preserve national interest and minimising potential financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by buying undervalued target companies.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles worldwide businesses face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their reach into the GCC countries face different problems, such as for example cultural differences, unknown regulatory frameworks, and market competition. But, once they buy local companies or merge with regional enterprises, they gain instant usage of local knowledge and learn from their regional partners. The most prominent cases 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 firm recognised being a strong rival. Nevertheless, the purchase not only removed local competition but in addition offered valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Also, another notable example may be the acquisition of a Arab super software, specifically a ridesharing business, by an international ride-hailing services provider. The international business gained a well-established brand name by having a large user base and substantial familiarity with the local transport market and customer choices through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to solidify companies and build up regional businesses to be capable of contending at an a international 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 bring in FDI by creating a favourable environment and bettering the ease of doing business for international investors. This strategy is not only directed to attract international investors since they will contribute 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.