Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

Blog Article

Mergers and acquisitions in the GCC are largely driven by economic diversification and market expansion.

GCC governments actively encourage mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a method to consolidate industries and develop local businesses to be capable of contending on a international level, as would Amin Nasser likely let you know. The need for financial diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working seriously to entice 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 critically, to enable M&A deals, which in turn will play an important part in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Businesses wanting to enter and expand their presence within the GCC countries face different problems, such as for instance cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, once they buy regional companies or merge with regional enterprises, they gain instant usage of local knowledge and study their regional partners. One of the more prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised as a strong rival. Nonetheless, the purchase not only removed local competition but in addition provided valuable local insights, a client base, plus an already established convenient infrastructure. Furthermore, another notable instance could be the acquisition of an Arab super app, specifically a ridesharing business, by an international ride-hailing services provider. The international firm obtained a well-established brand by having a big user base and extensive familiarity with the local transport market and consumer choices through the purchase.

In a recent study that examines the relationship 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 firms. For instance, large Arab banking institutions secured takeovers throughout the 2008 crises. Additionally, the research suggests that state-owned enterprises are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The the findings suggest that SOEs are far more prudent regarding acquisitions in comparison with 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 prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target businesses.