Strategic alliances and acquisitions offer companies with many perks when entering unknown markets.
In a recent study that investigates the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers found that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western companies. For example, big Arab banking institutions secured acquisitions throughout the financial crises. Furthermore, the analysis shows that state-owned enterprises are more unlikely than non-SOEs to make acquisitions during times of high economic policy uncertainty. The the findings indicate that SOEs are more prudent regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and mitigate potential financial instability. Furthermore, takeovers during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by capturing undervalued target companies.
Strategic mergers and acquisitions have emerged as a way to tackle obstacles worldwide companies face in Arab Gulf countries and emerging markets. Companies planning to enter and expand their presence into the GCC countries face various challenges, such as for example cultural differences, unfamiliar regulatory frameworks, and market competition. However, if they acquire local companies or merge with regional enterprises, they gain instant use of local knowledge and study their local partner's sucess. The most prominent examples of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation bought a regionally leading e-commerce platform, which the giant e-commerce firm recognised being a strong contender. But, the purchase not only removed local competition but in addition offered valuable regional insights, a customer base, and an already established convenient infrastructure. Also, another notable instance may be the purchase of an Arab super app, particularly a ridesharing company, by an worldwide ride-hailing services provider. The international company gained a well-established brand by having a big user base and extensive familiarity with the local transportation market and consumer preferences through the acquisition.
GCC governments actively encourage mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a method to solidify industries and build regional companies to become capable of compete at an a global level, as would Amin Nasser likely inform you. The necessity for economic diversification and market expansion drives much of the M&A deals 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 international investors. This plan is not only directed to attract foreign investors simply because they will add to economic growth but, more critically, to enable M&A deals, which in turn will play an important role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.