How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Strategic alliances and acquisitions are effective approaches for international businesses looking to expand their presence within the Arab Gulf.

In a recently available study that investigates the relationship 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 throughout the 2008 crises. Furthermore, the study shows that state-owned enterprises are more unlikely than non-SOEs to make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding takeovers compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and minimising potential financial instability. Moreover, takeovers during times of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing 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 wanting to enter and grow their presence into the GCC countries face various problems, such as for instance cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they buy local companies or merge with regional enterprises, they gain instant access to regional knowledge and learn from their local partner's sucess. The most 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 corporation recognised as being a strong competitor. However, the purchase not only eliminated local competition but also offered valuable local insights, a customer base, as well as an already founded convenient infrastructure. Moreover, another notable instance is the acquisition of a Arab super software, particularly a ridesharing company, by an international ride-hailing services provider. The multinational firm gained a well-established manufacturer with a large user base and substantial understanding of the local transportation market and customer preferences through the purchase.

GCC governments actively encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a means to solidify companies and build up local companies to be effective at competing at an a international scale, 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 earnestly to attract FDI by creating a favourable ecosystem and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors because they will add to economic growth but, more critically, to enable M&A deals, which in turn will play a substantial part in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.