Mergers and acquisitions within the GCC are largely driven by economic diversification and market expansion.
Strategic mergers and acquisitions have emerged as a way to overcome hurdles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence within the GCC countries face various difficulties, such as for example cultural differences, unknown regulatory frameworks, and market competition. However, once they buy local businesses or merge with local enterprises, they gain instant access to regional knowledge and study their local partner's sucess. One of the more prominent examples of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce firm recognised as a strong competitor. But, the purchase not only eliminated regional competition but in addition offered valuable regional insights, a client base, plus an already established convenient infrastructure. Moreover, another notable instance could be the purchase of an Arab super app, specifically a ridesharing business, by the international ride-hailing services provider. The multinational business gained a well-established manufacturer with a large user base and extensive understanding of the area transport market and consumer preferences through the acquisition.
GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to solidify companies and develop local companies to be effective at contending at an a worldwide level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to bring in FDI by making a favourable ecosystem and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract foreign investors because they will contribute to economic growth but, more crucially, to facilitate M&A transactions, which in turn will play a significant role in allowing GCC-based companies to get access to international markets and transfer technology and expertise.
In a recent study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, big Arab banking institutions secured takeovers through the 2008 crises. Also, the research demonstrates that state-owned enterprises are not as likely than non-SOEs to help make takeovers during times of high economic policy uncertainty. The results indicate that SOEs are more prudent regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and mitigate potential financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth impact 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.