How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Strategic alliances and acquisitions provide businesses with several benefits whenever entering unknown markets.

In recently published study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, large Arab finance institutions secured acquisitions during the financial crises. Furthermore, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and minimising potential financial instability. Moreover, takeovers during times of high economic policy uncertainty are associated with an increase 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 ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by capturing undervalued target businesses.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles worldwide businesses encounter in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their reach in the GCC countries face different difficulties, such as cultural distinctions, unknown regulatory frameworks, and market competition. Nevertheless, if they buy local companies or merge with regional enterprises, they gain immediate usage of local knowledge and study their local 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, which the giant e-commerce firm recognised being a strong rival. Nonetheless, the acquisition not merely eliminated regional competition but additionally provided valuable local insights, a client base, as well as an already established convenient infrastructure. Also, another notable example could be the purchase of a Arab super app, particularly a ridesharing company, by the international ride-hailing services provider. The international business gained a well-established brand by having a large user base and considerable understanding of the local transport market and customer choices through the acquisition.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a means to consolidate companies and build regional companies to become capable of compete on a international level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working earnestly to draw in FDI by creating a favourable environment and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract foreign investors simply because they will add to economic growth but, more critically, to enable M&A transactions, which in turn will play a substantial role in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.