How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

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

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their reach within the GCC countries face different difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they acquire local companies or merge with regional enterprises, they gain instant access to regional knowledge and study their local partner's sucess. One of the most prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong competitor. But, the acquisition not merely removed local competition but in addition offered valuable local insights, a client base, and an already established convenient infrastructure. Also, another notable example may be the purchase of a Arab super app, specifically a ridesharing business, by an worldwide ride-hailing services provider. The international corporation obtained a well-established manufacturer with a large user base and substantial familiarity with the local transportation market and consumer choices through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a means to consolidate companies and develop local companies to be have the capacity to competing on a international level, as would Amin Nasser likely tell you. The need for financial diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to invite FDI by making a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not only directed to attract international investors simply because they will add to economic growth but, more most importantly, to facilitate M&A transactions, which in turn will play a significant role in permitting 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 discovered that Arab Gulf firms are more inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, large Arab banking institutions secured takeovers throughout the 2008 crises. Also, the analysis suggests that state-owned enterprises are less likely than non-SOEs to produce acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs tend to be more prudent regarding acquisitions 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 prospective financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are related to an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by capturing undervalued target companies.