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 offer companies with many perks when entering unknown markets.

GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a means to solidify companies and build local companies to become effective at contending 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 activities into the GCC. GCC countries are working seriously to draw in FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors simply because they will contribute to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial 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 overcome obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their presence within the GCC countries face various problems, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, when they buy local companies or merge with local 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 giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised as being a strong contender. But, the acquisition not merely eliminated regional competition but also offered valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Moreover, another notable instance is the acquisition of a Arab super app, specifically a ridesharing business, by an worldwide ride-hailing services provider. The multinational business gained a well-established brand name having a big user base and extensive understanding of the area transportation market and client choices through the acquisition.

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered 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 instance, big Arab finance institutions secured acquisitions throughout the 2008 crises. Additionally, 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 the findings suggest that SOEs are far 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. Furthermore, acquisitions during times of high economic policy uncertainty are connected with a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.