Strategic alliances and acquisitions are effective strategies for multinational businesses looking to expand their operations within the Arab Gulf.
In recently published study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the authors found that Arab Gulf firms are more inclined to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. For example, big Arab banking institutions secured takeovers during the 2008 crises. Moreover, the study suggests that state-owned enterprises are less likely than non-SOEs to make takeovers during periods of high economic policy uncertainty. The the findings indicate that SOEs are more cautious regarding acquisitions when compared to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, stems from the imperative to protect national interest and mitigate potential financial instability. Moreover, takeovers during times of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the ones led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in such times by buying undervalued target companies.
Strategic mergers and acquisitions are seen as a way to tackle obstacles international companies face in Arab Gulf countries and emerging markets. Businesses attempting to enter and expand their reach within the GCC countries face different difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. But, once they buy local companies or merge with regional enterprises, they gain instant use of regional knowledge and study their local partner's sucess. One of 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 company recognised as a strong competitor. However, the purchase not merely eliminated regional competition but additionally provided valuable local insights, a client base, and an already established convenient infrastructure. Additionally, another notable example could be the acquisition of a Arab super software, specifically a ridesharing business, by an worldwide ride-hailing services provider. The international business gained a well-established brand name having a big user base and extensive familiarity with the local transport market and customer preferences through the purchase.
GCC governments actively encourage mergers and acquisitions through incentives such as for instance taxation breaks and regulatory approval as a means to consolidate companies and build up regional businesses to be effective at competing on a worldwide level, as would Amin Nasser likely inform you. The need for economic diversification and market expansion drives a lot of the M&A deals in the GCC. GCC countries are working earnestly to draw in FDI by making a favourable environment and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract foreign investors because they will contribute to economic growth but, more most importantly, to enable M&A transactions, which in turn will play a significant role in permitting GCC-based businesses to get access to international markets and transfer technology and expertise.