Strategic alliances and acquisitions are effective techniques for multinational businesses planning to expand their presence into 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 likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. For instance, large Arab banking institutions secured takeovers throughout the 2008 crises. Also, the analysis suggests that state-owned enterprises are less likely than non-SOEs to create 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, according to this paper, emanates from the imperative to preserve national interest and minimising potential financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are connected with a rise in investors' wealth for acquirers, and this wealth impact 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 have emerged as a way to tackle hurdles worldwide companies face in Arab Gulf countries and emerging markets. Companies planning to enter and expand their presence into the GCC countries face different difficulties, such as cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, if they acquire local companies or merge with regional enterprises, they gain immediate usage of local knowledge and learn from their regional partners. One of the most prominent cases of effective acquisitions in GCC markets is when a giant worldwide e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce company recognised as a strong rival. Nonetheless, the acquisition not merely removed local competition but in addition offered valuable regional insights, a customer base, and an already founded convenient infrastructure. Moreover, another notable instance may be the acquisition of a Arab super app, particularly a ridesharing company, by the worldwide ride-hailing services provider. The multinational firm gained a well-established brand name by having a large user base and extensive knowledge of the area transport market and client preferences through the acquisition.
GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to consolidate companies and build up local businesses to become effective at competing on a global scale, as would Amin Nasser likely tell you. The necessity for financial diversification and market expansion drives much of the M&A transactions into the GCC. GCC countries are working earnestly to draw in FDI by developing a favourable ecosystem and increasing the ease of doing business for foreign investors. This plan is not merely directed to attract international investors because they will add to economic growth but, more most importantly, to facilitate M&A deals, which in turn will play an important part in permitting GCC-based businesses to gain access to international markets and transfer technology and expertise.