How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Foreign companies planning to enter GCC markets can overcome local challenges through M&A activities.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their presence into the GCC countries face various problems, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, if they acquire regional businesses or merge with local enterprises, they gain instant access to regional knowledge and study their regional partners. One of the more prominent examples of effective acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised as being a strong competitor. But, the acquisition not only removed local competition but in addition provided valuable local insights, a client base, as well as an already established convenient infrastructure. Additionally, another notable example could be the acquisition of a Arab super app, specifically a ridesharing company, by an international ride-hailing services provider. The international corporation obtained a well-established manufacturer with a large user base and substantial familiarity with the local transportation market and consumer choices through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to consolidate industries and build regional companies to become effective at compete at an a global scale, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to entice FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play a substantial part in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

In recently published study that investigates the relationship 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 conduct of Western firms. For instance, large Arab banking institutions secured takeovers throughout the financial crises. Moreover, the study suggests that state-owned enterprises are less likely than non-SOEs to produce acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs are more prudent regarding acquisitions when comparing to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and mitigate potential financial instability. Moreover, takeovers during times of high economic policy uncertainty are connected with a rise in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, 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 companies.