Foreign companies attempting to enter GCC markets can overcome regional challenges through M&A transactions.
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 expand their presence in the GCC countries face different problems, such as for example cultural differences, unknown regulatory frameworks, and market competition. But, if they buy regional businesses or merge with regional enterprises, they gain immediate use of local knowledge and learn from their local partner's sucess. One of the more prominent cases of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce firm recognised as being a strong rival. Nonetheless, the purchase not merely eliminated local competition but in addition provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Additionally, another notable example could be the purchase of an Arab super app, namely a ridesharing business, by an worldwide ride-hailing services provider. The multinational corporation gained a well-established brand having a large user base and extensive knowledge of the area transportation market and consumer choices through the acquisition.
In a recently available study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. As an example, large Arab financial institutions secured takeovers through the 2008 crises. Moreover, the study demonstrates that state-owned enterprises are less likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to preserve national interest and minimising potential financial uncertainty. Moreover, takeovers during periods of high economic policy uncertainty are connected with an increase in investors' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Certainly, this wealth effect highlights the potential for SOEs just like the ones 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 taxation breaks and regulatory approval as a means to solidify industries and build local companies to be effective at compete at an a global level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to draw in FDI by creating a favourable ecosystem and bettering the ease of doing business for foreign investors. This plan is not only directed to attract foreign investors since they will contribute to economic growth but, more critically, to enable M&A transactions, which in turn will play a substantial role in permitting GCC-based businesses to achieve access to international markets and transfer technology and expertise.