Mergers and acquisitions within the GCC are largely driven by economic diversification and market expansion.
GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a method to consolidate companies and build regional companies to become capable of contending on a worldwide scale, as would Amin Nasser likely tell you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working seriously to attract FDI by developing a favourable ecosystem and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors simply because they will add to economic growth but, more crucially, to facilitate 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.
In a recently available study that investigates the relationship 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 firms. For instance, big Arab finance institutions secured acquisitions during the financial crises. Also, the analysis shows that state-owned enterprises are less likely than non-SOEs to help make acquisitions during periods of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding takeovers compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more pronounced for SOEs. Indeed, 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.
Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide companies encounter in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their reach within the GCC countries face various difficulties, such as for instance cultural differences, unfamiliar regulatory frameworks, and market competition. Nevertheless, once they buy local businesses or merge with local enterprises, they gain immediate usage of regional knowledge and study their regional partner's sucess. One of the more prominent cases 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 company recognised being a strong contender. However, the purchase not merely removed local competition but also provided valuable regional insights, a customer base, and an already established convenient infrastructure. Additionally, another notable instance may be the acquisition of a Arab super application, specifically a ridesharing company, by the worldwide ride-hailing services provider. The multinational corporation gained a well-established manufacturer having a large user base and considerable familiarity with the local transportation market and consumer choices through the acquisition.