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 are effective approaches for international businesses aiming to expand their presence in the Arab Gulf.

Strategic mergers and acquisitions have emerged as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach in the GCC countries face various challenges, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, if they acquire local companies or merge with regional enterprises, they gain immediate usage of local knowledge and learn from their regional partner's sucess. The most prominent cases of effective acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised as being a strong rival. Nevertheless, the purchase not only eliminated regional competition but in addition provided valuable regional insights, a client base, plus an already established convenient infrastructure. Moreover, another notable instance could be the acquisition of an Arab super app, specifically a ridesharing business, by the international ride-hailing services provider. The multinational business gained a well-established manufacturer having a large user base and extensive understanding of the area transportation market and consumer preferences through the purchase.

GCC governments actively promote mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a method to solidify companies and develop regional companies to be effective at compete at an a worldwide level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working earnestly to draw in FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract foreign investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play an important role in enabling GCC-based businesses to achieve access to international markets and transfer technology and expertise.

In recently published study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. For instance, large Arab banking institutions secured acquisitions during the financial crises. Furthermore, the analysis shows that state-owned enterprises are more unlikely than non-SOEs to create acquisitions during times of high economic policy uncertainty. The the findings suggest that SOEs tend to be more prudent regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to preserve national interest and minimising prospective financial uncertainty. Moreover, 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 effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.