Merger and Acquisition in the United Arab Emirates
April 05, 2023

The term "mergers and acquisitions" (M&A) describes the process of joining two or more businesses into one organization or buying out a business by another. More synergies and benefits than what each firm might obtain on its own are the aim of an M&A transaction.
M&A in the United Arab Emirates (UAE) have been on the rise in the recent years. The country has become an attractive destination for M&A deals due to its stable political and economic environment, favorable tax policies, and strategic location as a hub for business in the Middle East.
2021 was a record-breaking year for worldwide and Middle Eastern M&A activities after the Covid-19 slowdown. Sources claim that M&A increased by 66% in the Middle East and North Africa (MENA) area from 2020 due to the country's strong economic growth, favorable business environment, and increasing investor interest in the region.
Acquisitions typically involve a larger company buying a smaller one, although mergers might happen between two businesses that are about equal in size. M&A deals can be friendly—where both parties consent to the merger or acquisition—or hostile—where one party tries to buy out the other without the consent of the target firm.
There are several laws and regulations governing M&A in the UAE. The main legislation that governs M&A transactions is the UAE Commercial Companies Law (CCL), which outlines the rules and procedures for mergers, acquisitions, and other forms of corporate restructuring. Additionally, foreign investors may also be subject to specific regulations and restrictions, particularly in industries such as banking, insurance, and telecommunications.
The strategic position, robust infrastructure, and welcoming business environment of the UAE are anticipated to sustain the country's M&A activity in the years to come. Yet, there are hazards connected with any M&A activity, including regulatory difficulties, cultural obstacles, and integration problems.
In terms of the process, M&A transactions in the UAE typically involve several steps, including due diligence, negotiation of the terms and conditions of the deal, obtaining regulatory approvals, and executing the transaction documents. The UAE also has various free zones that offer special incentives and benefits to companies that choose to establish a presence there, including relaxed restrictions on foreign ownership and repatriation of profits.
The three main types of M&A risk are financial, operational, taxation and legal. When regarded by sellers and buyers, these worries are distinct and occasionally directly at odds with one another. Sellers seek to maximize strategic and operational synergies while minimizing overpaying and business interruption. Inefficient communication and lack of transparency can be a distressed environment and dealing in a distressed atmosphere bears more risk even while there are opportunities. In a distressed M&A transaction, diligence is especially crucial and seek professional guidance before pursuing M&A deals in the UAE.
The parties must agree on the risk allocation between the buyer and seller while taking into account the pandemic's ongoing consequences. On a distressed acquisition or sale, there are some fundamental difficulties that both buyers and sellers must take into account. Included among them are insolvency and bankruptcy considerations.
Overall, the UAE offers a conducive environment for M&A activity, with a strong economy, attractive investment opportunities, and favorable regulatory framework. As a result, it is likely that M&A activity in the UAE will continue to grow in the coming years, particularly in sectors such as healthcare, technology, and renewable energy.
MBG aims to provide with the pre-acquisition phase of the transaction, which will include comprehensive legal due diligence on the Target Business by drafting of term sheet, collecting key information related to the Target Company, corporate structure, corporate history and shareholding information of the Target Company. We offer unified legal support and expertise in determining the Target Company's contingent liabilities, as well as review of ongoing and possible legal action and comprehension of prior cases in which the Target Company was engaged.
At the time of the M&A transaction's signing, the sale and purchase agreement, disclosure letter, board resolutions, and powers of attorney are typically all signed. By creating these documents, the breadth of our corporate practice in the UAE enables us to advise clients on complex M&A transactions as well as delicate internal structuring problems. Professional guidance on commercial legal matters is now available thanks to the excellent expertise and current knowledge of our team of business and commercial lawyers in all areas of commercial law. To reduce risk in your M&A deal, contact us right now.