Mergers and acquisitions in the GCC are mostly driven by economic diversification and market expansion.
Strategic mergers and acquisitions have emerged as a way to tackle hurdles worldwide businesses face in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their reach into the GCC countries face different problems, such as cultural differences, unfamiliar regulatory frameworks, and market competition. Nonetheless, once they buy regional companies or merge with local enterprises, they gain instant 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 international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only eliminated local competition but also offered valuable local insights, a customer base, and an already established convenient infrastructure. Furthermore, another notable instance could be the purchase of a Arab super application, namely a ridesharing company, by the worldwide ride-hailing services provider. The multinational business obtained a well-established brand having a large user base and extensive familiarity with the area transport market and consumer choices through the purchase.
In recently published study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors discovered that Arab Gulf firms are more inclined to make takeovers during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. As an example, big Arab finance institutions secured acquisitions throughout the financial crises. Moreover, the analysis demonstrates that state-owned enterprises are more unlikely than non-SOEs to make takeovers during times of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to preserve national interest and minimising prospective financial instability. Moreover, takeovers during times of high economic policy uncertainty are associated with an increase in investors' wealth for acquirers, and this wealth effect 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 similar times by capturing undervalued target businesses.
GCC governments actively encourage mergers and acquisitions through incentives such as tax breaks and regulatory approval as a means to consolidate companies and develop local businesses to be capable of compete 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 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 strategy is not merely directed to attract foreign investors simply because they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play a substantial role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.