Exactly how FDI in GCC countries enable M&A activities

Exactly how FDI in GCC countries enable M&A activities

Blog Article

Strategic alliances and acquisitions offer businesses with several advantages whenever entering unfamiliar markets.

In recently published study that investigates 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 periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, large Arab financial institutions secured takeovers throughout the financial crises. Furthermore, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to preserve national interest and minimising potential financial instability. Furthermore, acquisitions during times of high economic policy uncertainty are related to an increase in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target companies.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their presence into the GCC countries face different challenges, such as for instance cultural differences, unknown regulatory frameworks, and market competition. However, if they acquire regional businesses or merge with local enterprises, they gain immediate use of regional knowledge and learn from their regional partners. One of the more prominent examples of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised being a strong rival. Nevertheless, the purchase not only removed regional competition but additionally provided valuable local insights, a client base, plus an already established convenient infrastructure. Additionally, another notable example may be the acquisition of an Arab super software, specifically a ridesharing business, by an worldwide ride-hailing services provider. The multinational company gained a well-established brand name by having a large user base and substantial familiarity with the local transportation market and consumer preferences through the acquisition.

GCC governments actively promote mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to solidify industries and build regional businesses to be effective at compete on a international level, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to entice FDI by developing a favourable ecosystem and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors since they will contribute to economic growth but, more crucially, to enable M&A deals, which in turn will play a significant role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.