Mergers and acquisitions in the GCC are mainly driven by economic diversification and market expansion.
In a recently available study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more likely to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western firms. For example, large Arab financial institutions secured takeovers during the 2008 crises. Moreover, the analysis shows that state-owned enterprises are more unlikely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The the findings suggest that SOEs are more cautious regarding takeovers in comparison 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 instability. Furthermore, acquisitions during periods of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth effect 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 possibilities in similar times by capturing undervalued target companies.
GCC governments actively promote mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a method to consolidate industries and build regional companies to be have the capacity to competing on a international level, as would Amin Nasser likely inform you. The necessity for economic diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working seriously to attract FDI by developing a favourable ecosystem and bettering the ease of doing business for international investors. This plan is not only directed to attract foreign investors since they will contribute to economic growth but, more crucially, to enable M&A deals, which in turn will play a significant role in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide businesses face in Arab Gulf countries and emerging markets. Businesses wanting to enter and expand their reach into the GCC countries face different problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. But, if they acquire local businesses or merge with regional enterprises, they gain immediate use of local knowledge and learn from their local partners. One of the most prominent examples of successful acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce firm recognised as being a strong rival. But, the purchase not merely removed regional competition but in addition provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Moreover, another notable example is the acquisition of an Arab super app, namely a ridesharing business, by the worldwide ride-hailing services provider. The multinational business obtained a well-established brand with a large user base and extensive knowledge of the area transportation market and consumer choices through the purchase.