Mergers and acquisitions within the GCC are largely driven by economic diversification and market expansion.
GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to consolidate companies and build regional companies to become effective at 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 creating a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors because they will add to economic growth but, more crucially, 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.
Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand 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 local enterprises, they gain instant use of regional knowledge and learn from their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised as being a strong contender. Nonetheless, the purchase not only removed local competition but additionally provided valuable local insights, a client base, plus an already established convenient infrastructure. Also, another notable instance may be the purchase of a Arab super application, particularly a ridesharing company, by an worldwide ride-hailing services provider. The multinational business gained a well-established brand name having a big user base and considerable understanding of the area transport market and customer preferences through the purchase.
In a recent 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 conduct of Western firms. For instance, big Arab finance institutions secured takeovers through the financial crises. Moreover, the study suggests that state-owned enterprises are less likely than non-SOEs to produce takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and minimising prospective financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by capturing undervalued target companies.