Strategic alliances and acquisitions are effective approaches for international companies aiming to expand their presence into the Arab Gulf.
GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to solidify industries and develop local companies to become capable of contending at an a global level, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to entice FDI by creating a favourable ecosystem and bettering the ease of doing business for foreign investors. This strategy is not merely directed to attract international investors simply because they will add to economic growth but, more crucially, to facilitate M&A deals, which in turn will play a substantial part in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.
In a recent study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make acquisitions during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab banking institutions secured acquisitions during the financial crises. Also, the study shows that state-owned enterprises are less likely than non-SOEs to help make takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.
Strategic mergers and acquisitions are seen as a way to overcome hurdles worldwide companies face in Arab Gulf countries and emerging markets. Companies wanting to enter and expand their presence in the GCC countries face various problems, such as for example cultural distinctions, unknown regulatory frameworks, and market competition. Nonetheless, once they buy local businesses or merge with regional enterprises, they gain immediate usage of regional knowledge and study their regional partner's sucess. One of the most prominent examples of successful acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce company recognised as a strong contender. However, the acquisition not merely removed local competition but also offered valuable regional insights, a client base, as well as an already established convenient infrastructure. Furthermore, another notable example is the purchase of a Arab super application, namely a ridesharing company, by the worldwide ride-hailing services provider. The international company obtained a well-established brand name with a big user base and substantial familiarity with the area transportation market and customer preferences through the acquisition.