Strategic alliances and acquisitions are effective approaches for international companies aiming to expand their operations into the Arab Gulf.
GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to consolidate companies and build local businesses to become capable of compete on a global scale, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A activities into the GCC. GCC countries are working seriously to bring in FDI by making a favourable environment and increasing the ease of doing business for foreign investors. This plan is not only directed to attract international investors since they will add to economic growth but, more critically, to facilitate M&A transactions, which in turn will play a substantial part in allowing GCC-based businesses to gain access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions have emerged as a way to tackle obstacles international businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and expand their reach within the GCC countries face various problems, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. However, if they acquire local companies or merge with local enterprises, they gain instant access to regional knowledge and study their local partner's sucess. One of the most prominent examples of successful 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 as being a strong competitor. Nevertheless, the purchase not only removed regional competition but additionally offered valuable regional insights, a customer base, plus an already established convenient infrastructure. Also, another notable example could be the purchase of an Arab super application, namely a ridesharing business, by an international ride-hailing services provider. The international corporation gained a well-established brand name with a big user base and extensive familiarity with the local transport market and customer choices through the purchase.
In a recently available study that investigates the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the writers discovered that Arab Gulf firms are more likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western businesses. As an example, big Arab finance institutions secured acquisitions during the financial crises. Moreover, the research suggests that state-owned enterprises are more unlikely than non-SOEs to produce takeovers during periods of high economic policy uncertainty. The the findings suggest that SOEs are far more cautious regarding takeovers in comparison with their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, emanates from the imperative to protect national interest and minimising prospective financial uncertainty. Furthermore, takeovers during times of high economic policy uncertainty are related to a rise in shareholders' wealth for acquirers, and this wealth impact is more noticable 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 buying undervalued target businesses.