Foreign companies attempting to enter GCC markets can overcome regional challenges through M&A transactions.
Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide companies face in Arab Gulf countries and emerging markets. Companies planning to enter and grow their presence in the GCC countries face different problems, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. However, if they buy local businesses or merge with local enterprises, they gain instant use of local knowledge and study their regional partner's sucess. The most prominent examples of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce firm recognised being a strong competitor. However, the purchase not merely eliminated regional competition but in addition offered valuable local insights, a client base, as well as an already established convenient infrastructure. Additionally, another notable instance is the purchase of a Arab super app, particularly a ridesharing business, by an worldwide ride-hailing services provider. The multinational corporation gained a well-established brand with a big user base and extensive knowledge of the area transportation market and consumer choices through the acquisition.
In a recent study that examines the connection 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 times of high economic policy uncertainty, which contradicts the behaviour of Western businesses. For example, large Arab finance institutions secured takeovers during the 2008 crises. Moreover, the study suggests that state-owned enterprises are less likely than non-SOEs to help make takeovers during periods of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding acquisitions when comparing to their non-SOE counterparts. The SOE's risk-averse approach, based on 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 connected with an increase in investors' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth effect 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 businesses.
GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to solidify industries and build regional companies to be have the capacity to competing at an a global scale, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors simply because they will add to economic growth but, more critically, to enable M&A transactions, which in turn will play a substantial role in permitting GCC-based businesses to achieve access to international markets and transfer technology and expertise.