C. Advantages and Disadvantages of Acquiring State-Owned Enterprises When a manager evaluates the profitability of acquiring a state-owned enterprise, it is critical to identify the advantages and disadvantages. This way, the company will be able to make effective and strategic decisions, especially when entering into a business in the volatile MENA region. Several driving factors can act as incentives for managers, including the fact that the acquisition could be seen as a strategic move. that supplies local brands, increases distribution channels, therefore leading to higher levels of efficiency. Despite these claims, Ayoubi argues that privatization in MENA countries is not linked to the management efficiency of state-owned companies as no studies verify this claim. It is argued that state-owned enterprises discourage competition while private ownership promotes competition while also helping to produce greater results (Ayoubi, 1997). In addition to this, the acquisition of a state-owned enterprise can be beneficial as it promotes market knowledge and improves government business relations in the economy. On the other hand, privatization of state-owned enterprises is highly subject to government influence, where governments can not only maximize their own financial revenues, but also pursue broader social objectives (e.g. Wortman 1990, Estrin 1994). Wasta's apparent problem in MENA is another important feature to take into consideration, especially when acquiring an SOE. For example, in the case of Egypt, the partially privatized Al-Fuloul companies (residents of the Mubarak regime) hold large shareholdings necessary to maintain bargaining power. A disadvantage of acquiring a state-owned company is the lengthy negotiation process and high costs. Strict restrictions such as stipulated employment guarantees, investment commitment, partial local ownership...... middle of paper ......-salvation>.6. El-Haddad, A. 2010. “Effects of the global crisis on the Egyptian textile and clothing sector.” International Labor Organization and Egyptian Center for Economic Studies, (accessed 12 December 2013), .7. Fattouh, B. 2013. Privatization in the Middle East and North Africa. Lecture notes. (Accessed 21 December 2013),7. US Department of State. 2013. “Investment Climate Report 2013.” U.S. Department of State, (accessed December 12, 2013), .8. World Bank. 1995. “Bureaucrats in Business.” World Bank Report 1995, (accessed 21 December 2013), .