Strategic alliances and acquisitions provide companies with several benefits when entering unfamiliar markets.
Strategic mergers and acquisitions have emerged as a way to tackle hurdles international companies face in Arab Gulf countries and emerging markets. Companies attempting to enter and expand their reach in the GCC countries face various challenges, such as for instance cultural differences, unknown regulatory frameworks, and market competition. Nonetheless, if they buy regional companies or merge with local enterprises, they gain instant usage of 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 acquired a regionally leading e-commerce platform, which the giant e-commerce corporation recognised as a strong contender. However, the acquisition not only removed local competition but in addition provided valuable regional insights, a client base, as well as an already established convenient infrastructure. Additionally, another notable instance may be the purchase of an Arab super application, particularly a ridesharing business, by an international ride-hailing services provider. The multinational corporation gained a well-established manufacturer by having a big user base and considerable familiarity with the area transportation market and customer preferences through the purchase.
In a recent study that examines the relationship between economic policy uncertainty and mergers and acquisitions in GCC markets, the researchers discovered that Arab Gulf firms are more likely to make takeovers during times of high economic policy uncertainty, which contradicts the behaviour of Western firms. As an example, big Arab banking institutions secured acquisitions through the financial crises. Moreover, the analysis suggests that state-owned enterprises are not as likely than non-SOEs to produce acquisitions during times of high economic policy uncertainty. The results suggest that SOEs tend to be more prudent regarding takeovers when comparing to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to protect national interest and minimising potential financial uncertainty. Moreover, takeovers during periods of high economic policy uncertainty are associated with a rise in shareholders' wealth for acquirers, and this wealth impact is more pronounced for SOEs. Indeed, this wealth impact highlights the potential for SOEs like the people led by Naser Bustami and Nadhmi Al-Nasr to exploit opportunities in similar times by buying undervalued target companies.
GCC governments actively promote mergers and acquisitions through incentives such as for instance tax breaks and regulatory approval as a way to solidify companies and build up regional companies to be have the capacity to contending at an a international scale, as would Amin Nasser likely inform you. The need for financial diversification and market expansion drives much of the M&A activities into the GCC. GCC countries are working earnestly to bring in FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not only directed to attract foreign investors because they will add 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 achieve access to international markets and transfer technology and expertise.