Strategic alliances and acquisitions provide companies with several benefits whenever entering unfamiliar markets.
GCC governments actively encourage mergers and acquisitions through incentives such as for example tax breaks and regulatory approval as a method to solidify companies and develop local businesses to become effective at competing on a global 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 invite FDI by creating a favourable ecosystem and increasing 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 an important role in allowing GCC-based businesses to achieve access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions are seen as a way to overcome obstacles worldwide businesses face in Arab Gulf countries and emerging markets. Businesses planning to enter and grow their presence into the GCC countries face various difficulties, such as cultural differences, unknown regulatory frameworks, and market competition. Nevertheless, once they buy local companies or merge with regional enterprises, they gain immediate usage of local knowledge and learn from their local partner's sucess. One of the most prominent examples of successful 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 contender. Nonetheless, the purchase not only removed regional competition but additionally provided valuable local insights, a client base, and an already established convenient infrastructure. Furthermore, another notable example could be the acquisition of a Arab super app, specifically a ridesharing business, by the international ride-hailing services provider. The multinational corporation obtained a well-established manufacturer with a large user base and substantial knowledge of the area transport market and customer choices through the acquisition.
In a recently available study that investigates 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 conduct of Western firms. As an example, large Arab banking institutions secured takeovers through the 2008 crises. Furthermore, the study shows that state-owned enterprises are not as likely than non-SOEs to make takeovers during times of high economic policy uncertainty. The results suggest that SOEs are far more cautious regarding takeovers in comparison to their non-SOE counterparts. The SOE's risk-averse approach, in accordance with this paper, emanates from the imperative to preserve national interest and minimising prospective financial uncertainty. Moreover, takeovers during times of high economic policy uncertainty are connected with a rise in investors' 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 possibilities in similar times by capturing undervalued target companies.