Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

Blog Article

Strategic alliances and acquisitions provide businesses with several benefits when entering unknown markets.

Strategic mergers and acquisitions have emerged as a way to tackle hurdles worldwide companies encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and expand their presence into the GCC countries face different problems, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, once they acquire local businesses or merge with regional enterprises, they gain immediate access to local knowledge and learn from their regional partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only removed regional competition but in addition provided valuable regional insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable instance could be the purchase of a Arab super application, namely a ridesharing company, by the worldwide ride-hailing services provider. The international company obtained a well-established brand name with a big user base and considerable understanding of the local transportation market and customer choices through the purchase.

In a recently available study that examines 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 companies. For instance, large Arab finance institutions secured takeovers during the financial crises. Additionally, the research demonstrates that state-owned enterprises are less likely than non-SOEs to make takeovers during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and minimising potential financial uncertainty. 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 opportunities 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 way to consolidate companies and build up regional companies to become effective at competing at an a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working earnestly to draw in FDI by creating a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors simply because they will contribute to economic growth but, more critically, to enable M&A transactions, which in turn will play a substantial role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.