Exactly how FDI in GCC countries facilitate M&A activities

Exactly how FDI in GCC countries facilitate M&A activities

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Mergers and acquisitions within the GCC are largely driven by economic diversification and market expansion.

Strategic mergers and acquisitions have emerged as a way to tackle hurdles worldwide 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 instant use of regional knowledge and study their local partners. The most prominent cases of successful acquisitions in GCC markets is when a giant international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. But, the purchase not merely removed regional competition but additionally offered valuable local insights, a customer base, plus an already founded convenient infrastructure. Additionally, another notable instance may be the acquisition of an Arab super app, namely a ridesharing business, by the worldwide ride-hailing services provider. The multinational business obtained a well-established manufacturer by having a big user base and substantial understanding of the local transport 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 writers found that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, big Arab banking institutions secured acquisitions during the 2008 crises. Also, the study shows that state-owned enterprises are more unlikely 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 compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to preserve national interest and mitigate prospective financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are connected with an increase in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by capturing undervalued target businesses.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a means to solidify industries and develop regional companies to become capable of compete on a worldwide scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A deals in the GCC. GCC countries are working seriously to draw in FDI by creating 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 contribute to economic growth but, more critically, to enable M&A transactions, which in turn will play a substantial role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.