Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

Blog Article

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

In recently published 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 periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, big Arab banking institutions secured takeovers throughout the financial crises. Moreover, the study suggests that state-owned enterprises are not as likely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The the findings indicate that SOEs are more cautious 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 mitigate prospective financial uncertainty. Moreover, takeovers during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones 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 tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies wanting to enter and grow their presence within the GCC countries face various problems, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. But, once they buy regional businesses or merge with local enterprises, they gain immediate access to regional knowledge and learn from their local partner's sucess. One of the most prominent examples of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong rival. However, the purchase not only eliminated regional competition but also provided valuable local insights, a customer base, plus an already established convenient infrastructure. Additionally, another notable example could be the acquisition of a Arab super app, particularly a ridesharing company, by the international ride-hailing services provider. The international firm obtained a well-established manufacturer with a big user base and extensive familiarity with the local transport market and client choices 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 have the capacity to competing at an a international level, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to draw in FDI by creating a favourable environment and bettering the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors simply because they will add to economic growth but, more crucially, to facilitate 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.