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 local challenges through M&A activities.

In recently published study that investigates 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 companies. For example, big Arab finance institutions secured acquisitions during the 2008 crises. Moreover, the study suggests that state-owned enterprises are not as likely than non-SOEs to produce acquisitions during times of high economic policy uncertainty. The results indicate 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 mitigate prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are connected with an increase in investors' wealth for acquirers, and this wealth effect is more pronounced 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 possibilities in such times by buying undervalued target companies.

Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide businesses face in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach within the GCC countries face different difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they buy local companies or merge with regional enterprises, they gain instant access to regional knowledge and learn from their regional partners. The most prominent examples of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised as being a strong contender. But, the acquisition not merely eliminated regional competition but also provided valuable regional insights, a customer base, plus an already founded convenient infrastructure. Moreover, another notable instance may be the purchase of an Arab super software, particularly a ridesharing company, by the international ride-hailing services provider. The international business gained a well-established brand name having a big user base and substantial familiarity with the local transport market and customer choices through the purchase.

GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to solidify companies and build regional businesses to become effective at compete on a international level, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working seriously to attract FDI by creating a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not merely directed to attract international investors because they will contribute to economic growth but, more crucially, to enable M&A deals, which in turn will play a significant role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.