Important Considerations for M & A in the UAE

The United Arab Emirates (UAE) has emerged as a key market for mergers and acquisitions (M&A) activity in the Middle East, with several high-profile deals in recent years. However, there are some important aspects to consider for M&A transactions in the UAE that differ from other jurisdictions.

Private share sales and asset sales are the most common transaction structures. Share sales are popular as they cause minimal disruption, though due diligence can be challenging due to limited public information. Asset sales allow buyers to choose specific assets and liabilities but transferring assets and employees is logistically difficult.

For private companies, certain approvals are required depending on the target’s activity, such as from education or healthcare authorities. Financial institutions require extensive approvals, especially regarding anti-money laundering and know your customers requirements. If the combined market share of the parties exceeds 40%, merger control approval is needed from the Ministry of Economy.

Public deals require approval from the Securities and Commodities Authority (SCA), the market regulator. The SCA limits break fees in public transactions to 2% of the offer value. Otherwise, break fees are permitted but uncommon in private M&A.

Due diligence focuses heavily on information provided by the seller due to limited public records. Checks on the National Economic Register provide basic details for onshore companies, while DIFC and ADGM registers have more information for companies there. Credit reports from the AECB or Dubai Chamber can indicate financial position. Litigation, tax, employment, intellectual property, data protection and cyber security due diligence rely primarily on seller disclosure. Real estate ownership cannot be publicly searched, so title deeds and leases are also needed from the seller.

Finance comes from a mix of debt, including convertible loans, bank finance and peer-to-peer lending, and equity, such as private equity, venture capital, family offices and IPOs. Advisers typically include lawyers, financial advisers, tax advisers and occasionally pension actuaries. The target can pay adviser costs in private deals but not for public companies due to rules against financial assistance.