Foreign companies planning to enter GCC markets can overcome regional challenges through M&A transactions.
GCC governments actively promote mergers and acquisitions through incentives such as tax breaks and regulatory approval as a way to consolidate companies and develop regional businesses to be capable of contending on a international level, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working seriously to bring in FDI by creating a favourable environment and increasing the ease of doing business for foreign investors. This strategy is not only directed to attract foreign investors simply because they will add to economic growth but, more most importantly, to enable M&A deals, which in turn will play a substantial part in enabling GCC-based businesses to gain 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 authors found that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, big Arab banking institutions secured takeovers during the 2008 crises. Additionally, the analysis suggests that state-owned enterprises are more unlikely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers in comparison to 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 uncertainty. Furthermore, takeovers during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced 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 similar times by buying undervalued target businesses.
Strategic mergers and acquisitions have emerged as a way to overcome hurdles international companies face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their presence within the GCC countries face different challenges, such as for example cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, once they acquire regional companies or merge with regional enterprises, they gain instant usage of local knowledge and learn from their regional partners. The most prominent examples of effective acquisitions in GCC markets is when a heavyweight worldwide e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce company recognised being a strong rival. Nevertheless, the acquisition not only removed local competition but in addition provided valuable regional insights, a client base, plus an already established convenient infrastructure. Additionally, another notable instance is the acquisition of an Arab super app, specifically a ridesharing business, by the worldwide ride-hailing services provider. The multinational company gained a well-established brand by having a large user base and considerable familiarity with the area transport market and client preferences through the acquisition.