Mergers and acquisitions within the GCC are mostly driven by economic diversification and market expansion.
GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a way to consolidate companies and build local businesses to become have the capacity to competing on a worldwide scale, as would Amin Nasser likely tell you. The necessity for financial diversification and market expansion drives a lot of the M&A deals into the GCC. GCC countries are working earnestly to attract FDI by making a favourable environment and bettering the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors because they will add to economic growth but, more critically, to enable M&A transactions, which in turn will play a significant part in allowing GCC-based businesses to achieve access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions have emerged as a way to overcome obstacles worldwide businesses encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and expand their reach in the GCC countries face different challenges, such as for example cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, when they buy local companies or merge with regional enterprises, they gain instant access to regional knowledge and learn from their regional partners. One of the more prominent examples of effective 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 being a strong rival. However, the acquisition not only eliminated local competition but in addition offered valuable regional insights, a customer base, plus an already founded convenient infrastructure. Furthermore, another notable instance could be the acquisition of a Arab super app, specifically a ridesharing business, by an worldwide ride-hailing services provider. The multinational company gained a well-established brand name having a big user base and extensive familiarity with the local transportation market and consumer preferences through the acquisition.
In recently published study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers 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. As an example, big Arab financial institutions secured takeovers through the financial crises. Moreover, the analysis shows that state-owned enterprises are more unlikely than non-SOEs to create takeovers during times of high economic policy uncertainty. The results indicate that SOEs tend to be more prudent regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, stems from the imperative to preserve national interest and minimising prospective financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are related to an increase in investors' wealth for acquirers, and this wealth effect is more noticable for SOEs. Indeed, this wealth impact highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit possibilities in similar times by buying undervalued target companies.