M&A unleashed: diversification and growth in the economic landscapes of KSA and UAE

3 minute read

During our Strategy class, taught by Dr Timothy Galpin, he underpinned the importance of merger and acquisition activities in organizations' growth strategy to achieve their long-term ambitions.

Working as a management consultant in Saudi Arabia and UAE for almost a decade, I am witnessing the ambition of growth in the different domains to diversify the economy and increase the non-oil GDP. For example, through Vision 2030, Saudi Arabia aims to increase their non-oil GDP contribution from sixteen percent to fifty percent.

As two prominent members of the Gulf Cooperation Council (GCC), the strategy of mergers and acquisitions (M&A) will gain substantial traction as a growth driver for the next couple of decades. Both nations recognize that M&A activities can strategically boost their economies, diversify revenue streams and enhance global competitiveness.

Here are four key reasons why M&A activities are critical for Saudi Arabia and UAE:

1. Diversification of economies

Saudi Arabia and the UAE, traditionally oil-dependent economies, are increasingly turning to M&A as a means of diversification. One of the most prominent sovereign wealth funds, PIF, has invested in the future-proof electric car, Lucid. The company aims to open its first factory outside of the US in Saudi Arabia by the end of 2023, boosting diversification in the automobile industry.

2. New market access

M&A is pivotal in expanding market access for Saudi Arabian and UAE firms. For example, a telecommunications powerhouse in Saudi Arabia acquired a neighboring nation's telecom leader. Another example can be found in the UAE, where a retail conglomerate merged with a well-established e-commerce platform, enabling cross-border market penetration and growth.

3. Technological innovation enhancement

The focus on technological advancement is evident in Saudi Arabia and the UAE's M&A landscape. For example, a Saudi software firm's acquisition of a global AI startup, and a UAE aviation company's merger with a drone technology innovator, highlight how these nations harness M&A to infuse innovation and cutting-edge technology into their industries.

4. Attraction of foreign investment and expertise

Saudi Arabia and the UAE are prime destinations for foreign investment due to their M&A activities. This can be seen in a European conglomerate’s investment in a post-merger Saudi healthcare chain and in an Asian tech giant acquiring a UAE-based fintech firm. Both examples demonstrate how these nations attract international expertise, funding and partnerships.

In conclusion, the significance of M&A activities in the GCC region for the next decade cannot be overstated. By expanding market reach, fostering innovation, optimizing resources and attracting foreign investment, M&A activities are set to play a pivotal role in driving sustained growth. As GCC nations continue their economic diversification and development journey, strategic M&A initiatives will remain a vital tool in their arsenal, shaping a prosperous future for the region.

Oxford Executive Diploma in Strategy and Innovation