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 are effective strategies for international companies looking to expand their operations in the Arab Gulf.

In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers found that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, big Arab finance institutions secured acquisitions throughout the 2008 crises. Moreover, the analysis shows that state-owned enterprises are not as likely than non-SOEs to make acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs tend to be more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and minimising prospective financial uncertainty. Moreover, acquisitions during times of high economic policy uncertainty are connected with an increase in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth impact 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.

GCC governments actively encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to solidify companies and build up local companies to be effective at compete at an a worldwide scale, as would Amin Nasser likely inform you. The necessity for financial diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to entice FDI by developing a favourable environment and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract international investors since they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions are seen as a way to overcome obstacles international companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. But, if they buy regional companies or merge with local enterprises, they gain immediate use of local knowledge and learn from their local partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong rival. Nonetheless, the purchase not merely removed local competition but in addition provided valuable regional insights, a customer base, plus an already founded convenient infrastructure. Furthermore, another notable instance could be the acquisition of an Arab super software, particularly a ridesharing business, by an worldwide ride-hailing services provider. The multinational corporation gained a well-established brand name with a big user base and considerable knowledge of the area transport market and customer preferences through the acquisition.