How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

International businesses planning to enter GCC markets can overcome local challenges through M&A transactions.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a way to consolidate companies and build up regional companies to become capable of contending at an a international scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working seriously to invite FDI by creating a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors since they will add to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a significant part in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach in the GCC countries face different challenges, such as for example cultural differences, unknown regulatory frameworks, and market competition. However, once they buy local businesses or merge with local enterprises, they gain immediate usage of local knowledge and learn from their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised as being a strong contender. Nonetheless, the purchase not only removed regional competition but also provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Furthermore, another notable instance is the purchase of a Arab super application, namely a ridesharing company, by the international ride-hailing services provider. The international firm obtained a well-established brand by having a large user base and extensive familiarity with the local transportation market and client choices through the purchase.

In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western firms. For example, big Arab finance institutions secured takeovers during the financial crises. Also, the analysis shows that state-owned enterprises are less likely than non-SOEs to help make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs are more prudent regarding acquisitions when comparing to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and minimising prospective financial instability. Moreover, takeovers during periods of high economic policy uncertainty are connected with an increase in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target companies.