How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Foreign companies attempting to enter GCC markets can overcome regional challenges through M&A transactions.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Businesses wanting to enter and expand their reach into the GCC countries face different problems, such as cultural differences, unfamiliar regulatory frameworks, and market competition. However, when they acquire local businesses or merge with regional enterprises, they gain immediate access to local knowledge and learn from their local partners. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong rival. But, the purchase not merely removed local competition but additionally offered valuable local insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable example is the acquisition of a Arab super software, particularly a ridesharing business, by the worldwide ride-hailing services provider. The multinational business obtained a well-established brand name with a big user base and considerable familiarity with the area transportation market and client preferences through the acquisition.

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 likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western companies. For example, large Arab finance institutions secured takeovers throughout the financial crises. Additionally, the analysis suggests that state-owned enterprises are not as likely than non-SOEs to produce acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding takeovers when 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 mitigate potential financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are connected with a rise in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by capturing undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a means to solidify industries and develop local businesses to be have the capacity to competing at an a global level, as would Amin Nasser likely tell 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 entice FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a substantial role in enabling GCC-based companies to achieve access to international markets and transfer technology and expertise.