Foreign businesses attempting to enter GCC markets can overcome regional challenges through M&A transactions.
GCC governments actively encourage mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a way to consolidate companies and build local businesses to become effective at competing at an a global level, as would Amin Nasser likely let you know. The necessity for financial diversification and market expansion drives much of the M&A deals 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 strategy is not merely directed to attract foreign investors because they will add to economic growth but, more crucially, to enable M&A transactions, which in turn will play a substantial role in enabling GCC-based businesses to gain access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and grow their presence within the GCC countries face various difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, once they acquire regional businesses or merge with local enterprises, they gain immediate use of regional knowledge and study their local partner's sucess. One of the most prominent cases 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 firm recognised as a strong competitor. Nevertheless, the purchase not only eliminated regional competition but also provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Moreover, another notable instance could be the acquisition of a Arab super software, namely a ridesharing company, by the international ride-hailing services provider. The international firm obtained a well-established manufacturer with a large user base and substantial understanding of the area transportation market and customer preferences through the purchase.
In a recent study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, large Arab financial institutions secured takeovers through the 2008 crises. Furthermore, the analysis suggests that state-owned enterprises are less likely than non-SOEs to help make takeovers during periods of high economic policy uncertainty. The the findings indicate that SOEs are more prudent regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and mitigate potential financial instability. Furthermore, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by capturing undervalued target companies.