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 techniques for multinational businesses planning to expand their presence in the Arab Gulf.

GCC governments actively promote mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to consolidate industries and build regional businesses to become capable of competing on a international scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working earnestly to entice FDI by creating a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play an important part in enabling GCC-based businesses to get 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 acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, big Arab financial institutions secured takeovers during the financial crises. Also, the study shows that state-owned enterprises are not as likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, takeovers 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 impact highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target companies.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international businesses encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face different difficulties, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. However, when they buy regional companies or merge with local enterprises, they gain immediate access to local knowledge and study their regional partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only removed regional competition but additionally offered valuable local insights, a customer base, and an already established convenient infrastructure. Moreover, another notable example is the purchase of a Arab super app, namely a ridesharing business, by an international ride-hailing services provider. The international company obtained a well-established brand name by having a large user base and extensive familiarity with the area transportation market and customer choices through the acquisition.