On effective corporate strategies in the Arab gulf

On effective corporate strategies in the Arab gulf

Blog Article

Mergers and acquisitions in the GCC are mainly driven by economic diversification and market expansion.

GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a way to solidify companies and build up regional companies to become effective at competing at an a global level, as would Amin Nasser likely let you know. The need for economic diversification and market expansion drives a lot of the M&A transactions into the GCC. GCC countries are working earnestly to attract FDI by developing a favourable environment and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors because they will add to economic growth but, more crucially, to enable M&A transactions, which in turn will play an important role in permitting GCC-based companies to achieve access to international markets and transfer technology and expertise.

Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and grow their reach in the GCC countries face different challenges, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, if they acquire regional businesses or merge with regional enterprises, they gain instant access to regional knowledge and learn from their regional partners. One of the more prominent examples of successful acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong contender. Nevertheless, the purchase not only removed local competition but additionally provided valuable local insights, a client base, and an already founded convenient infrastructure. Moreover, another notable instance could be the acquisition of an Arab super application, namely a ridesharing company, by an international ride-hailing services provider. The international firm obtained a well-established brand by having a big user base and extensive understanding of the area transport market and consumer preferences through the acquisition.

In a recently available study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab banking institutions secured takeovers throughout the 2008 crises. Additionally, the study demonstrates that state-owned enterprises are not as likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs are far more prudent regarding acquisitions in comparison to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and mitigate prospective financial uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target businesses.