Mergers and acquisitions are no longer a luxury for Gulf companies; they have become a condition of survival in markets marked by small size, high costs and tightening regulation. Between 2022 and 2024, the value of merger and acquisition deals in the GCC countries exceeded USD 180 billion, of which Kuwait accounted for about 12%, despite the limited size of its market compared with its neighbours.
The recent wave of mergers has been concentrated in the banking, energy, telecommunications, real estate and logistics sectors, driven by companies’ desire to achieve economies of scale, by the requirements of regulators, and by governments’ vision of building “national champions” capable of competing regionally.
From Competition to Integration: 3 Types Shaping the Landscape
The Horizontal Merger: A Double-Edged Sword
This is the most common type in Kuwait, and takes place between companies operating in the same line of business with the aim of reducing competition and increasing market share. The most prominent example is the acquisition by Kuwait Finance House (“KFH”) of Bahrain’s Ahli United Bank, which was completed in 2022 and created one of the largest Islamic banks in the region, with assets exceeding USD 120 billion. A Kuwaiti banker familiar with the deal says: “A horizontal merger gives you growth in one year instead of 10 years of building, but it puts you squarely under the watchful eye of the Competition Protection Agency.”
The Vertical Merger: Supply Chain Security
Companies operating at different stages of the production chain resort to it in order to secure stable operations. Kuwait Flour Mills and Bakeries Company is a model of vertical integration, managing the chain from the import of wheat to the distribution of bread. National Industries Holding Company likewise follows the same approach by combining quarrying, transport and ready-mix concrete activities to serve major government projects.
The Conglomerate Merger: A Shield Against Oil Volatility
This is adopted by the large family groups to diversify their sources of income. The investments of the Al-Kharafi and Alghanim groups are spread across cars, restaurants, real estate and financial services, which has helped them to weather crises such as the 2008 crash and the fall in oil prices. Analysts warn, however, that “excessive expansion may lead to managerial fragmentation and a loss of operational focus.”
| Type of merger | Horizontal merger | Vertical merger | Conglomerate merger |
|---|---|---|---|
| Objective in the Gulf | Increasing market share | Securing supply chains | Diversifying risk |
| Prominent Kuwaiti example | KFH + Ahli United | Kuwait Flour Mills | Al-Kharafi Group |
| Main risks | Rejection by regulators | Need for very large capital | Managerial fragmentation |
Why Is Kuwait Merging? The Central Bank and Vision 2035 at the Forefront
The small size of the domestic market pushes companies to seek rapid growth by buying competitors or expanding abroad. The instructions of the Central Bank of Kuwait also play a decisive role, particularly with the capital requirements and “Basel 3” standards that push small banks to merge in order to avoid distress.
At government level, the Kuwait Integrated Petroleum Industries Company (“KIPIC”) was established in 2016 through the merger of 3 oil companies, with the aim of unifying efforts to deliver the Al-Zour refinery project, which cost USD 16 billion. “No single entity on its own could deliver a project of this size,” comments an oil-sector source.
The Other Side: When the Numbers Fail in the Face of Influence
Despite the advantages, many deals run into the wall of the “struggle for influence”. In the Gulf’s family-dominated business environment, disagreement over the chairmanship of the board of directors and the allocation of powers is a principal reason for negotiations collapsing before they are completed.
Corporate culture also poses a complex challenge, especially when a conservative conventional bank is merged with a fintech start-up. “One wants 10 signatures to launch a service, and the other wants to launch it tomorrow,” is how a mergers adviser working in the Kuwaiti market sums it up.
The Next Wave: Financial Technology and Real Estate
Observers expect the wave of mergers to continue during 2026-2027, with the financial technology and real estate sectors tipped to lead the way. The Central Bank of Kuwait’s tightening of capital requirements for electronic payment companies may push 3 to 4 small wallets to merge and create an entity that competes with “KNET”. Likewise, the enactment of the anticipated mortgage law will push small real estate finance companies to seek alliances in order to survive.
The decisive factor in the success of any merger remains the ability to integrate the human and cultural element. As one chief executive puts it: “Numbers add up easily in Excel, but merging interests and visions is the real test. 70% of mergers worldwide fail to achieve their objectives, and Kuwait is no exception.”