Exactly why M&As in GCC countries are recommended

Exactly why M&As in GCC countries are recommended

Blog Article

Mergers and acquisitions in the GCC are mainly driven by economic diversification and market expansion.

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western firms. For instance, large Arab banking institutions secured acquisitions throughout the 2008 crises. Furthermore, the research shows that state-owned enterprises are not as likely than non-SOEs to make acquisitions during times of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding acquisitions in comparison 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 potential financial instability. Moreover, takeovers during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth impact 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 businesses.

GCC governments actively promote mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a means to consolidate companies and develop regional companies to be effective at contending at an a worldwide level, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to entice FDI by developing a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not merely directed to attract international investors because they will contribute to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a substantial role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle hurdles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their reach within the GCC countries face different difficulties, such as for instance cultural distinctions, unknown regulatory frameworks, and market competition. Nevertheless, once they acquire local businesses or merge with regional enterprises, they gain immediate usage of regional knowledge and study their regional partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised being a strong competitor. Nonetheless, the purchase not only eliminated local competition but also provided valuable local insights, a client base, as well as an already founded convenient infrastructure. Also, another notable instance may be the acquisition of an Arab super software, particularly a ridesharing business, by the international ride-hailing services provider. The multinational corporation obtained a well-established brand by having a big user base and substantial understanding of the local transportation market and customer choices through the purchase.