How FDI in GCC countries enable M&A activities

How FDI in GCC countries enable M&A activities

Blog Article

International companies planning to enter GCC markets can overcome regional challenges through M&A transactions.

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For instance, large Arab financial institutions secured takeovers through the 2008 crises. Also, the research shows that state-owned enterprises are less likely than non-SOEs to make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding takeovers when comparing 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 mitigate potential financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are connected with a rise in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target companies.

Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide companies face in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach into the GCC countries face various challenges, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, once they buy regional businesses or merge with regional enterprises, they gain instant use of local knowledge and study their regional partners. One of the more prominent cases 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 corporation recognised as being a strong competitor. However, the purchase not only removed local competition but additionally provided valuable regional insights, a client base, and an already established convenient infrastructure. Also, another notable example could be the purchase of an Arab super software, specifically a ridesharing business, by an worldwide ride-hailing services provider. The international corporation gained a well-established manufacturer having a large user base and extensive familiarity with the local transport market and customer choices through the acquisition.

GCC governments actively promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a way to solidify industries and develop local businesses to be have the capacity to competing at an a global scale, as would Amin Nasser likely let you know. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working seriously to invite FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A transactions, which in turn will play a significant role in enabling GCC-based companies to achieve access to international markets and transfer technology and expertise.