Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

Blog Article

International businesses attempting to enter GCC markets can overcome regional challenges through M&A transactions.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to consolidate industries and build regional businesses to become capable of competing on a international level, as would Amin Nasser likely tell you. The need for financial diversification and market expansion drives a lot of the M&A activities in the GCC. GCC countries are working seriously to draw in FDI by making a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract foreign investors simply because they will add to economic growth but, more most importantly, to enable M&A transactions, which in turn will play a significant role in permitting GCC-based companies to gain access to international markets and transfer technology and expertise.

In a recently available study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab banking institutions secured acquisitions through the 2008 crises. Additionally, the analysis shows that state-owned enterprises are less likely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and minimising prospective financial uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are associated with a rise in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target companies.

Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide companies face in Arab Gulf countries and emerging markets. Companies wanting to enter and grow their reach within the GCC countries face various challenges, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. Nevertheless, when they acquire regional companies or merge with regional enterprises, they gain immediate usage of regional knowledge and learn from their local partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised being a strong contender. However, the purchase not only eliminated regional competition but additionally offered valuable regional insights, a client base, and an already established convenient infrastructure. Additionally, another notable example is the acquisition of an Arab super application, namely a ridesharing business, by the international ride-hailing services provider. The international company obtained a well-established manufacturer having a large user base and considerable understanding of the local transport market and client preferences through the purchase.