How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

Foreign companies planning to enter GCC markets can overcome local challenges through M&A transactions.

Strategic mergers and acquisitions have emerged as a way to tackle hurdles international businesses face in Arab Gulf countries and emerging markets. Businesses wanting to enter and expand their reach within the GCC countries face various challenges, such as cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, once they acquire local businesses or merge with local enterprises, they gain instant use of local knowledge and study their regional partners. The most prominent cases of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong rival. But, the purchase not merely eliminated local competition but also provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Furthermore, another notable example could be the purchase of an Arab super app, namely a ridesharing business, by the worldwide ride-hailing services provider. The multinational corporation gained a well-established manufacturer having a large user base and extensive familiarity with the area transportation market and customer preferences through the purchase.

In a recently available study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more inclined to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For example, big Arab finance institutions secured acquisitions throughout the financial crises. Additionally, the research shows that state-owned enterprises are less likely than non-SOEs to make takeovers during periods of high economic policy uncertainty. The results suggest that SOEs are more prudent regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and minimising potential financial instability. Furthermore, acquisitions during times of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a method to consolidate companies and build up regional companies to become effective at compete at an a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives much of the M&A activities into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a significant role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.