Strategic alliances and acquisitions provide businesses with several benefits when entering unknown markets.
GCC governments actively encourage mergers and acquisitions through incentives such as taxation breaks and regulatory approval as a means to solidify industries and develop local businesses to become capable of compete at an a global level, as would Amin Nasser likely let you know. The need for financial diversification and market expansion drives much of the M&A transactions in the GCC. GCC countries are working earnestly to attract FDI by developing a favourable ecosystem and increasing the ease of doing business for international investors. This strategy is not merely directed to attract international investors because they will add to economic growth but, more crucially, to enable M&A deals, which in turn will play an important part in allowing GCC-based companies to get access to international markets and transfer technology and expertise.
Strategic mergers and acquisitions are seen as a way to tackle hurdles international companies encounter in Arab Gulf countries and emerging markets. Companies attempting to enter and grow their presence within the GCC countries face different challenges, such as for instance cultural distinctions, unfamiliar regulatory frameworks, and market competition. Nonetheless, if they acquire local companies or merge with local enterprises, they gain immediate usage of local knowledge and learn from their regional partner's sucess. One of the most prominent examples of effective acquisitions in GCC markets is when a giant international e-commerce corporation bought a regionally leading e-commerce platform, that the giant e-commerce corporation recognised being a strong contender. Nevertheless, the purchase not merely removed local competition but additionally provided valuable regional insights, a customer base, as well as an already founded convenient infrastructure. Additionally, another notable example may be the purchase of a Arab super software, namely a ridesharing company, by the worldwide ride-hailing services provider. The international corporation obtained a well-established brand by having a big user base and extensive understanding of the area transport market and customer preferences 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 likely to make acquisitions during periods of high economic policy uncertainty, which contradicts the behaviour of Western companies. As an example, big Arab financial institutions secured acquisitions during the financial crises. Moreover, the research demonstrates that state-owned enterprises are more unlikely than non-SOEs in order to make acquisitions during periods of high economic policy uncertainty. The results indicate that SOEs are more prudent regarding acquisitions compared to their non-SOE counterparts. The SOE's risk-averse approach, based on this paper, stems from the imperative to preserve national interest and mitigate potential financial instability. Moreover, acquisitions during periods of high economic policy uncertainty are associated with an increase in shareholders' wealth for acquirers, and this wealth effect is more noticable for SOEs. Certainly, 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 capturing undervalued target companies.