How FDI in GCC countries facilitate M&A activities

How FDI in GCC countries facilitate M&A activities

Blog Article

Strategic alliances and acquisitions are effective strategies for multinational businesses planning to expand their presence into the Arab Gulf.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Businesses attempting 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, if they buy regional companies or merge with local enterprises, they gain instant usage of regional knowledge and study their regional partner's sucess. The most prominent cases of effective acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not merely removed regional competition but in addition provided valuable regional insights, a client base, as well as an already founded convenient infrastructure. Also, another notable example may be the acquisition of an Arab super software, particularly a ridesharing business, by an international ride-hailing services provider. The multinational corporation gained a well-established manufacturer by having a big user base and substantial understanding of the local transport market and consumer choices through the acquisition.

In a recently available 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 likely to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For example, large Arab finance institutions secured takeovers throughout the financial crises. Additionally, the analysis demonstrates that state-owned enterprises are less likely than non-SOEs to create takeovers during times of high economic policy uncertainty. The results indicate that SOEs are far more prudent regarding acquisitions 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 times of high economic policy uncertainty are connected with an increase in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by capturing undervalued target companies.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a way to solidify companies and build up regional companies to become effective at competing at an a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors because they will add to economic growth but, more crucially, to enable M&A transactions, which in turn will play a substantial role in permitting GCC-based companies to achieve access to international markets and transfer technology and expertise.