Strategic alliances and acquisitions provide companies with several advantages whenever entering unfamiliar markets.
Strategic mergers and acquisitions are seen as a way to tackle hurdles international businesses face in Arab Gulf countries and emerging markets. Businesses planning to enter and expand their presence in the GCC countries face various difficulties, such as for example cultural differences, unfamiliar regulatory frameworks, and market competition. Nevertheless, once they buy regional businesses or merge with regional enterprises, they gain immediate access to local knowledge and learn from their local partners. The most prominent cases of effective acquisitions in GCC markets is when a heavyweight international e-commerce corporation acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised being a strong competitor. Nevertheless, the acquisition not merely removed regional competition but additionally provided valuable local insights, a client base, and an already established convenient infrastructure. Furthermore, another notable example is the acquisition of a Arab super software, particularly a ridesharing business, by the worldwide ride-hailing services provider. The international corporation gained a well-established brand name by having a large user base and extensive knowledge of the area transport market and consumer choices through the purchase.
In recently published study that examines the connection between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more inclined to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, big Arab banking institutions secured acquisitions during the financial crises. Additionally, the analysis suggests that state-owned enterprises are not as likely than non-SOEs in order to make takeovers during times of high economic policy uncertainty. The results indicate that SOEs are far more cautious regarding acquisitions in comparison with their non-SOE counterparts. The SOE's risk-averse approach, according to this paper, emanates from the imperative to protect national interest and minimising potential financial instability. Furthermore, acquisitions during periods of high economic policy uncertainty are connected with a rise in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, this wealth effect highlights the potential for SOEs just like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in such times by buying undervalued target companies.
GCC governments actively encourage mergers and acquisitions through incentives such as for example taxation breaks and regulatory approval as a means to solidify companies and build up regional businesses to be have the capacity to contending on a worldwide level, as would Amin Nasser likely tell you. The necessity for economic diversification and market expansion drives a lot of the M&A transactions in the GCC. GCC countries are working seriously to entice FDI by making a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract foreign investors since they will contribute to economic growth but, more crucially, to enable M&A transactions, which in turn will play a substantial role in enabling GCC-based companies to get access to international markets and transfer technology and expertise.