Strategic alliances and acquisitions offer companies with many perks when entering unknown markets.
Strategic mergers and acquisitions have emerged as a way to overcome hurdles international businesses encounter in Arab Gulf countries and emerging markets. Companies planning to enter and expand their reach in the GCC countries face different challenges, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. But, when they buy local companies or merge with local enterprises, they gain immediate usage of local knowledge and learn from their regional partners. The most prominent cases of successful acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong rival. Nevertheless, the purchase not only eliminated regional competition but also offered valuable regional insights, a client base, and an already founded convenient infrastructure. Additionally, another notable example may be the purchase of an Arab super application, particularly a ridesharing company, by an worldwide ride-hailing services provider. The international business gained a well-established manufacturer with a large user base and considerable knowledge of the local transport market and consumer preferences through the acquisition.
GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a means to consolidate companies and develop local companies to be effective at compete on a global scale, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives much of the M&A deals into the GCC. GCC countries are working earnestly to entice FDI by developing a favourable ecosystem and bettering the ease of doing business for international investors. This strategy is not only directed to attract foreign investors simply because they will contribute to economic growth but, more critically, to enable M&A deals, which in turn will play a substantial part in allowing GCC-based companies to gain access to international markets and transfer technology and expertise.
In a recently available study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, large Arab financial institutions secured acquisitions during the financial crises. Also, the analysis demonstrates that state-owned enterprises are less likely than non-SOEs to create acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs tend to be more prudent regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and mitigate prospective financial instability. Furthermore, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.