Exactly why M&As in GCC countries are recommended

Exactly 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 a recent study that examines 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 periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab financial institutions secured takeovers through the financial crises. Also, the analysis shows that state-owned enterprises are less likely than non-SOEs in order to make acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs are far more prudent regarding acquisitions 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 minimising prospective financial instability. Furthermore, acquisitions during times of high economic policy uncertainty are related to an increase in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target businesses.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach within the GCC countries face different difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. But, once they acquire local companies 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, which the giant e-commerce firm recognised being a strong rival. Nevertheless, the purchase not only removed regional competition but additionally provided valuable local insights, a client base, and an already established convenient infrastructure. Additionally, another notable example may be the acquisition of an Arab super software, namely a ridesharing business, by an international ride-hailing services provider. The international corporation gained a well-established manufacturer having a large user base and substantial knowledge of the local transport market and client choices through the acquisition.

GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to consolidate companies and build up regional businesses to be have the capacity to contending at an a international level, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working seriously to attract FDI by developing a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors because they will add to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a significant role in enabling GCC-based companies to achieve access to international markets and transfer technology and expertise.