Strategic alliances and acquisitions are effective approaches for international businesses looking to expand their operations within the Arab Gulf.
GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a method to solidify industries and develop regional companies to become effective at contending at an a worldwide scale, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A transactions in the GCC. GCC countries are working seriously to bring in FDI by creating a favourable ecosystem and bettering the ease of doing business for foreign investors. This plan is not only directed to attract international investors simply because they will contribute to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play an important role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions are seen as a way to tackle obstacles worldwide companies face in Arab Gulf countries and emerging markets. Businesses wanting to enter and grow their presence into the GCC countries face various problems, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, once they acquire local companies or merge with regional enterprises, they gain instant use 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 bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised as a strong rival. However, the purchase not only removed regional competition but additionally provided valuable local insights, a client base, plus an already established convenient infrastructure. Additionally, another notable example may be the purchase of an Arab super software, namely a ridesharing company, by the international ride-hailing services provider. The international firm obtained a well-established brand with a large user base and considerable knowledge of the area transport market and customer preferences through the purchase.
In a recent study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the conduct of Western businesses. For example, large Arab banking institutions secured takeovers through the financial crises. Also, the analysis shows that state-owned enterprises are not as likely than non-SOEs to make acquisitions during periods of high economic policy uncertainty. The the findings suggest that SOEs are more prudent regarding acquisitions when comparing 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 uncertainty. Moreover, acquisitions during periods of high economic policy uncertainty are related to 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 like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target businesses.