International companies planning to enter GCC markets can overcome local challenges through M&A activities.
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 local knowledge and learn from their local partners. One of the most prominent examples of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong contender. Nevertheless, the acquisition not merely removed regional competition but in addition provided valuable local insights, a customer base, and an already founded convenient infrastructure. Additionally, another notable instance may be the acquisition of an Arab super app, particularly a ridesharing business, by the international ride-hailing services provider. The multinational corporation gained a well-established manufacturer by having a large user base and substantial knowledge of the local transport market and client preferences through the acquisition.
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 inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, large Arab finance institutions secured takeovers throughout the financial crises. Additionally, the research shows that state-owned enterprises are less likely than non-SOEs in order to make takeovers during periods of high economic policy uncertainty. The the findings suggest that SOEs are more cautious regarding takeovers in comparison with 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 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 possibilities in such times by buying undervalued target companies.
GCC governments actively promote mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a way to consolidate companies and build up 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 entice FDI by making a favourable environment and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract foreign investors since they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a significant role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.