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 provide companies with many perks when entering unfamiliar markets.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to solidify companies and build up local businesses to be effective at compete on a international level, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to invite FDI by developing a favourable environment and bettering the ease of doing business for international investors. This strategy is not only directed to attract international investors since they will contribute to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a substantial role in allowing GCC-based companies to achieve access to international markets and transfer technology and expertise.

In recently published study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, big Arab financial institutions secured acquisitions during the financial crises. Also, the analysis suggests that state-owned enterprises are less likely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The the findings suggest that SOEs are far more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are related to an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.

Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various difficulties, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nevertheless, when they acquire local companies or merge with local enterprises, they gain instant access to local knowledge and learn from their regional partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised as a strong rival. Nonetheless, the acquisition not merely removed regional competition but additionally offered valuable local insights, a client base, plus an already established convenient infrastructure. Furthermore, another notable example could be the purchase of an Arab super application, 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 knowledge of the area transport market and client preferences through the purchase.