Foreign companies wanting to enter GCC markets can overcome local challenges through M&A activities.
GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a method to solidify companies and build local businesses to be have the capacity to compete on 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 transactions in the GCC. GCC countries are working seriously to invite FDI by creating a favourable ecosystem and increasing the ease of doing business for international investors. This plan is not only directed to attract international investors because they will add to economic growth but, more critically, to facilitate M&A transactions, which in turn will play an important 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 attempting to enter and expand their presence into the GCC countries face various difficulties, such as cultural distinctions, unknown regulatory frameworks, and market competition. Nevertheless, if they acquire regional businesses or merge with regional enterprises, they gain instant access to regional knowledge and study their local partner's sucess. One of the most prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong competitor. But, the acquisition not merely eliminated local competition but in addition offered valuable local insights, a client base, as well as an already founded convenient infrastructure. Furthermore, another notable instance may be the purchase of an Arab super software, particularly a ridesharing business, by an worldwide ride-hailing services provider. The multinational business gained a well-established manufacturer having a large user base and substantial understanding of the area transport market and customer preferences through the acquisition.
In a recent study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. For instance, large Arab financial institutions secured takeovers through the financial crises. Additionally, the research suggests that state-owned enterprises are less likely than non-SOEs in order to make takeovers during times of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers when compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to protect national interest and mitigate potential financial uncertainty. Moreover, acquisitions during times of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth impact is more pronounced 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 such times by capturing undervalued target businesses.