Foreign businesses attempting to enter GCC markets can overcome local challenges through M&A activities.
In a recently available study that examines the connection 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 times of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, large Arab financial institutions secured takeovers through the financial crises. Furthermore, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs in order to make takeovers during times of high economic policy uncertainty. The the findings indicate that SOEs are far more cautious regarding acquisitions when compared 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 minimising potential financial uncertainty. Moreover, acquisitions during times of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact 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.
Strategic mergers and acquisitions are seen as a way to tackle hurdles international companies face in Arab Gulf countries and emerging markets. Businesses planning to enter and expand their reach within the GCC countries face various problems, such as for instance cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they acquire regional businesses or merge with local enterprises, they gain immediate usage of local knowledge and study their local partners. One of the more prominent examples of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised being a strong rival. Nevertheless, the purchase not only removed local competition but in addition offered valuable local insights, a client base, and an already founded convenient infrastructure. Additionally, another notable example is the purchase of an Arab super software, namely a ridesharing business, by an worldwide ride-hailing services provider. The multinational corporation gained a well-established brand name having a large user base and substantial understanding of the area transportation market and consumer preferences through the purchase.
GCC governments actively encourage mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to solidify industries and develop local businesses to be effective at competing at an a global scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable environment and increasing the ease of doing business for international investors. This plan is not only directed to attract international investors simply because they will add to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a significant role in enabling GCC-based companies to gain access to international markets and transfer technology and expertise.