Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

Blog Article

International businesses attempting to enter GCC markets can overcome regional challenges through M&A transactions.

GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a method to solidify industries and build up regional businesses to be effective at compete on a worldwide level, as would Amin Nasser likely let you know. The need for financial diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract foreign 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 role in permitting GCC-based companies to get access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses face in Arab Gulf countries and emerging markets. Companies wanting to enter and grow their presence within the GCC countries face various difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they buy local companies or merge with regional enterprises, they gain immediate usage of local knowledge and study their local partner's sucess. One of the most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce corporation recognised being a strong rival. Nevertheless, the purchase not only removed local competition but also provided valuable regional insights, a customer base, plus an already established convenient infrastructure. Also, another notable instance could be the acquisition of a Arab super app, specifically a ridesharing business, by an international ride-hailing services provider. The international corporation gained a well-established manufacturer with a big user base and considerable understanding of the area transport market and customer choices through the purchase.

In a recent study that investigates the connection 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 firms. For example, big Arab financial institutions secured acquisitions throughout the 2008 crises. Furthermore, the research suggests that state-owned enterprises are less likely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and minimising potential financial instability. Moreover, acquisitions during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.