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 techniques for multinational businesses planning to expand their presence within the Arab Gulf.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to consolidate industries and develop local companies to become have the capacity to contending on a international level, as would Amin Nasser likely let you know. The need for financial diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to attract FDI by creating a favourable environment and increasing the ease of doing business for foreign investors. This plan is not only directed to attract international investors since they will add to economic growth but, more most importantly, to enable M&A transactions, which in turn will play a significant part in allowing GCC-based businesses to gain access to international markets and transfer technology and expertise.

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 presence into the GCC countries face various problems, such as for instance cultural differences, unknown regulatory frameworks, and market competition. But, once they buy local businesses or merge with local enterprises, they gain instant usage of local knowledge and learn from their local partners. One of the more prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong rival. However, the acquisition not merely eliminated regional competition but also offered valuable regional insights, a client base, and an already established convenient infrastructure. Also, another notable instance could be the purchase of an Arab super application, particularly a ridesharing company, by the international ride-hailing services provider. The multinational firm obtained a well-established brand by having a large user base and extensive understanding of the local transport market and consumer choices through the purchase.

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 conduct of Western firms. For instance, big Arab finance institutions secured takeovers during the financial crises. Moreover, the research suggests that state-owned enterprises are more unlikely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The the findings suggest that SOEs are far more cautious regarding takeovers compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact is more noticable 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 possibilities in similar times by buying undervalued target businesses.