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 techniques for international companies planning to expand their presence within the Arab Gulf.

Strategic mergers and acquisitions are seen as a way to tackle hurdles international companies face in Arab Gulf countries and emerging markets. Businesses planning to enter and expand their presence into the GCC countries face various problems, such as for example cultural differences, unknown regulatory frameworks, and market competition. But, once they buy local businesses or merge with local enterprises, they gain immediate use of regional knowledge and learn from their local partner's sucess. One of the more prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce corporation recognised being a strong rival. However, the acquisition not only removed regional competition but in addition provided valuable local insights, a customer base, plus an already established convenient infrastructure. Moreover, another notable example may be the purchase of an Arab super app, specifically a ridesharing company, by the international ride-hailing services provider. The multinational business obtained a well-established manufacturer by having a large user base and extensive familiarity with the area transport market and customer preferences through the acquisition.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to solidify companies and develop regional businesses to become have the capacity to competing on a global scale, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives a lot of the M&A deals into the GCC. GCC countries are working seriously to bring in FDI by creating a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract international investors simply because they will contribute to economic growth but, more critically, to facilitate M&A transactions, which in turn will play a significant role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab finance institutions secured takeovers through the 2008 crises. Also, the research demonstrates that state-owned enterprises are less likely than non-SOEs to create acquisitions during times of high economic policy uncertainty. The the findings suggest that SOEs tend to be more prudent regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and mitigate potential financial uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth effect 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 similar times by capturing undervalued target companies.