International businesses planning to enter GCC markets can overcome local challenges through M&A activities.
Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide companies face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their reach within the GCC countries face different challenges, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, if they acquire regional companies or merge with regional enterprises, they gain instant access to regional knowledge and learn from their local partners. The most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong contender. Nonetheless, the purchase not merely removed local competition but additionally provided valuable regional insights, a client base, plus an already founded convenient infrastructure. Furthermore, another notable example may be the purchase of a Arab super app, specifically a ridesharing business, by an worldwide ride-hailing services provider. The multinational company obtained a well-established brand having a large user base and extensive understanding of the local transport market and client choices through the purchase.
GCC governments actively promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to solidify companies and build regional businesses to become have the capacity to compete at an a worldwide level, as would Amin Nasser likely tell you. The need for financial diversification and market expansion drives a lot of the M&A deals into the GCC. GCC countries are working seriously to bring in FDI by making a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not only directed to attract foreign investors because they will contribute to economic growth but, more crucially, to enable M&A deals, which in turn will play a significant role in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.
In recently published study that investigates 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 acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western companies. For instance, large Arab financial institutions secured acquisitions through the 2008 crises. Also, the research demonstrates that state-owned enterprises are less likely than non-SOEs to create acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are more prudent regarding takeovers 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 mitigate potential financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are related to an increase in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Indeed, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by capturing undervalued target companies.