Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

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Strategic alliances and acquisitions provide businesses with several benefits whenever entering unfamiliar markets.

Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence into the GCC countries face various problems, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, when they acquire regional businesses or merge with local enterprises, they gain instant use of regional knowledge and learn from their local partner's sucess. One of the most prominent cases of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong competitor. But, the acquisition not merely removed local competition but additionally provided valuable local insights, a customer base, plus an already established convenient infrastructure. Also, another notable instance is the acquisition of a Arab super app, specifically a ridesharing business, by the international ride-hailing services provider. The multinational firm obtained a well-established brand by having a big user base and extensive understanding of the area transportation market and client choices through the purchase.

GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a method to solidify industries and build up local businesses to become capable of competing on a worldwide level, as would Amin Nasser likely let you know. The need for economic diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to draw in FDI by making a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors since they will contribute to economic growth but, more critically, to enable M&A transactions, which in turn will play an important part in allowing GCC-based companies to get access to international markets and transfer technology and expertise.

In recently published 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 acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, big Arab finance institutions secured acquisitions through the 2008 crises. Additionally, the analysis suggests that state-owned enterprises are less likely than non-SOEs to make acquisitions during times of high economic policy uncertainty. The the findings suggest that SOEs are far more cautious regarding takeovers when compared to 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. Furthermore, takeovers during times 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 people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.