How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

International companies wanting to enter GCC markets can overcome regional challenges through M&A activities.

Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide companies face in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their presence within the GCC countries face different problems, such as for example 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 partner's sucess. The most 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 contender. However, the purchase not merely removed regional competition but in addition provided valuable regional insights, a client base, plus an already founded convenient infrastructure. Also, another notable instance may be the acquisition of an Arab super application, specifically a ridesharing company, by an international ride-hailing services provider. The multinational corporation obtained a well-established manufacturer by having a big user base and substantial understanding of the local transportation market and customer preferences through the purchase.

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 acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, big Arab finance institutions secured takeovers throughout the financial crises. Furthermore, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs in order to make takeovers during times of high economic policy uncertainty. The results indicate that SOEs are more cautious regarding takeovers in comparison with 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 periods of high economic policy uncertainty are connected with an increase 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 ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such 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 local businesses to be have the capacity to contending on a worldwide level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A transactions into 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 only directed to attract international investors simply because they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play an important part in permitting GCC-based companies to get access to international markets and transfer technology and expertise.