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 strategies for multinational companies planning to expand their operations into the Arab Gulf.

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 into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. However, when they acquire local businesses or merge with local enterprises, they gain instant usage of regional knowledge and study their regional partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong competitor. But, the purchase not merely removed regional competition but additionally provided valuable local insights, a client base, as well as an already founded convenient infrastructure. Also, another notable example may be the acquisition of an Arab super app, namely a ridesharing company, by an international ride-hailing services provider. The international corporation gained a well-established manufacturer by having a big user base and substantial knowledge of the local transportation market and customer choices through the purchase.

In a recently available study that examines 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 behaviour of Western businesses. As an example, big Arab banking institutions secured acquisitions through the 2008 crises. Also, the research shows that state-owned enterprises are more unlikely than non-SOEs in order to make takeovers during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and minimising potential financial instability. Furthermore, acquisitions during periods of high economic policy uncertainty are connected with an increase in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target businesses.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to consolidate companies and build up regional businesses to be have the capacity to contending at an a international level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working seriously to attract FDI by developing a favourable environment and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors simply because they will add to economic growth but, more crucially, to enable M&A deals, which in turn will play an important part in allowing GCC-based companies to get access to international markets and transfer technology and expertise.