United Arab Emirates: Mergers & Acquisitions Comparative Guide

1 Deal structure

1.1 How are private and public M&A transactions typically structured in your jurisdiction?

Private merger transactions are the norm in the United Arab Emirates and account for a sizeable portion of the M&A market.

Private mergers in the United Arab Emirates usually take two forms: share sales and asset sales.

Share sale: It is becoming increasingly common for share sales to be structured through a holding company incorporated in a common law jurisdiction such as the Abu Dhabi Global Market (ADGM) or the Dubai International Financial Centre (DIFC). For background, the ADGM and the DIFC are independent jurisdictions from the onshore United Arab Emirates, with a common law framework and their own courts in which disputes are adjudicated in English and under English law principles.

Definitive documents in a share sale typically include:

• share purchase agreements;
• share subscription agreements;
• shareholder agreements; and
• disclosure letters.

Asset sale: Asset sales are less common and involve the transfer of employees, which can be a logistical hassle if the transferring entity has significant number of employees. There is no statutory mechanism for transfer of employees and the transfer process involves cancelling their existing visas and applying for fresh visas, as well as entering into new employment contracts which treats their employment as continuous.

Other structures: Statutory mergers under Federal Law 32/2021 on Commercial Companies are rare as the provisions under the law are cumbersome. This structure is sometimes considered for mergers within a group, as part of an internal group restructuring exercise.

Public M&A: Public M&A takes the following forms:

• mergers which can be in form of amalgamation or combination;
• mandatory acquisition;
• voluntary acquisition; and
• partial acquisition.

Transactions involving a public company require approval from the Securities and Commodities Authority (SCA), the securities regulator in the United Arab Emirates.

1.2 What are the key differences and potential advantages and disadvantages of the various structures?

Share sales are prevalent because of minimal disruption to business. The advantage of this approach is that only the entity's shareholding changes, so its licences, existing business, employee relationships and asset ownership remain largely untouched. The disadvantage is that the acquirer does not get to cherry-pick assets and liabilities that it would like to take on. In addition, because of the lack of public information in the United Arab Emirates, the legal due diligence process can be challenging and involves heavy reliance on the seller's representations.

An asset sale is undertaken in the event of a hive-off of a specific business line from a larger group or where the acquirer does not wish to assume certain liabilities of the target. The advantage of this approach is that the acquirer can choose the specific assets and liabilities for transfer to the new entity. The disadvantage is the logistical hassle involved with acquiring new licences (particularly if the entity requires various government approvals), the novation of contracts to the new entity and the transfer of employees.

1.3 What factors commonly influence the choice of sale process/transaction structure?

Some of the factors that influence the choice of transaction structure are as follows:

• Valuation: A valuation of the business is generally carried out to determine the sale price. If the buyer does not wish to assume certain liabilities, an asset sale may be worth considering.
• Group of companies: The acquisition of a group of entities is generally structured as a share sale since the purchase of a stake in the holding company is a cleaner approach.
• Foreign ownership restrictions: If there are any sector-specific foreign ownership restrictions, it is prudent to have a holding company structure out of the ADGM or DIFC where the local owner is only a shareholder and not a director.
• Government licences and approvals: If the target has existing approvals and licences, a share purchase is convenient rather than reinventing the wheel by applying for new licences.
• Business relationships: A business transfer will involve the novation of all existing contracts with clients, vendors and suppliers. If the number of contracts is high, it is worth considering a share sale.
• Employees: If there are a significant number of employees in a target, a share purchase is preferable to avoid the hassle of transferring each employee's visa sponsorship to the new entity.
• IP considerations: If the target owns valuable IP, the IP transfer mechanism will also dictate the transaction structure.

At present, tax considerations are minimal because there is no corporate tax or transfer regime in the United Arab Emirates. However, this is set to change in 2023 when corporate tax will be introduced in the United Arab Emirates.

2 Initial steps

2.1 What documents are typically entered into during the initial preparatory stage of an M&A transaction?

The documents entered into during the initial preparatory stage of an M&A transaction include:

• Non-disclosure agreements: Non-disclosure agreements usually cover the subject matter of negotiations and business-specific information that parties might come in contact with during initial discussions.
• Letters of intent: Letters of intents (also known as 'term sheets' or 'memoranda of understanding') list the key commercial terms of the transaction. Term sheets can be either binding or non-binding depending on the parties. Non-binding term sheets are usually the preferred approach in the United Arab Emirates.

2.2 Are break fees permitted in your jurisdiction (by a buyer and/or the target)? If so, under what conditions will they generally be payable? What restrictions and other considerations should be addressed in formulating break fees?

Break fees, while permitted in the United Arab Emirates, are not common. In the context of public M&A, the Securities and Commodities Authority regulations state that break fees should be disclosed in the offer document and capped at 2% of the offer value.

Break fees are generally payable when the target wishes to accept an offer from an alternative acquirer and terminate the exclusivity clause under the letter of intent.

While formulating break fees, the estimated costs incurred by the acquirer for due diligence and reviewing the deal are usually considered.

2.3 What are the most commonly used methods of financing transactions in your jurisdiction (debt/equity)?

A mix of both methods is seen in the UAE market.

Sources of debt financing include:

• convertible loans from family or friends for seed-stage companies;
• bank finance; and
• peer-to-peer lending platforms (eg, Beehive, Funding Souq).

Sources of equity financing include:

• angel investors;
• crowdfunding platforms (eg, Eureeca);
• private equity and venture capital funds;
• sovereign funds;
• family offices; and
• initial public offerings.

As in many international jurisdictions, a public company is not permitted to provide financial aid to anyone to acquire its shares.

2.4 Which advisers and stakeholders should be involved in the initial preparatory stage of a transaction?

An M&A deal in the United Arab Emirates generally involves the following advisers and stakeholders:

• Financial advisers or investment bankers: Both buy side and sell side generally have their own financial advisers who advise on the key commercial terms of the deal including valuation and pricing.
• Lawyers: Both the buy side and sell side are usually represented by lawyers. The buyer's lawyers conduct the legal due diligence and draft the key acquisition documents.
• Tax advisers: Tax advisers play a key role in deciding the transaction structure, particularly in cross-border deals.

2.5 Can the target in a private M&A transaction pay adviser costs or is this limited by rules against financial assistance or similar?

Public companies are prohibited from providing financial assistance for the acquisition of their shares, which is likely to include paying for adviser costs. In private M&A, it is common for parties to agree to bear their own costs – and for such costs to be covered under 'leakage'.

3 Due diligence

3.1 Are there any jurisdiction-specific points relating to the following aspects of the target that a buyer should consider when conducting due diligence on the target? (a) Commercial/corporate, (b) Financial, (c) Litigation, (d) Tax, (e) Employment, (f) Intellectual property and IT, (g) Data protection, (h) Cybersecurity and (i) Real estate.

(a) Commercial/corporate

There is no elaborate public register in the United Arab Emirates, comparable to common law jurisdictions such as that maintained by the Companies House in the United Kingdom. Official public information can be obtained on onshore companies via the National Economic Register, which provides information on an entity's registered address, registered business activities and licence validity.

Public information about free zone companies (other than those in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM)) is limited. The DIFC and ADGM, being common law jurisdictions, have a public register with information on, among other things, a company's registered address, share capital, shareholders, directors, share capital and data protection officer.

There is no statutory stamp duty on contracts and electronically signed documents are legally enforceable before the courts.

(b) Financial

Information about charges on assets is not publicly available and buyers generally rely on auditors' reports and the seller's representations in connection with the indebtedness levels of the target. That said, the target can obtain a credit report from the Al Etihad Credit Bureau (AECB) to provide to the buyer. The AECB is a government organisation that collects credit and financial data from banks and other financial institutions and provides credit reports to companies in the United Arab Emirates. The AECB report includes the company's address, ownership details, credit facilities and track record for payments over the past two years.

Additionally, a credit report can be obtained from the Dubai Chamber of Commerce, which provides such reports to third parties (without knowledge of the target). This report includes credit ratings and recommended credit limits, in addition to the company's business, economic and financial information, such as details of its shareholders, directors, auditors, bankers, payment history, purchasing terms and significant customers.

(c) Litigation

There is no publicly accessible database for litigation. Accordingly, a buyer will rely on the seller's representations and information furnished by the seller. If the buyer wishes to carry out formal litigation checks, it will need a power of attorney from the target or the seller.

(d) Tax

Currently, only value added tax is applicable in the United Arab Emirates; therefore, due diligence is limited to checking whether the target has valid registrations and has completed statutory filings.

(e) Employment

In the United Arab Emirates, most companies have over 90% expatriate employees demography. Due diligence will thus involve ascertaining whether:

• employees are validly employed; and
• the target has complied with all its statutory obligations.

In addition, there is no mandatory pension scheme for employees – employees are entitled to end-of-service gratuity payable upon termination. A target should ideally have some funds reserved under its books of accounts for this contingent liability. Finally, there are no trade unions in the United Arab Emirates.

(f) Intellectual property and IT

IP due diligence will generally include checking IP registrations and a basic search of registered trademarks may be carried out online. A key consideration in this domain is the prohibitively high cost of IP registration in the United Arab Emirates. Smaller to medium-sized companies and start-ups refrain from such registration due to potential increases in their early operational costs.

(g) Data protection

The United Arab Emirates recently issued Federal Decree-Law 45/2021 on the Protection of Data, which aligns data protection laws in the country with global best practices. Legal due diligence entails ensuring that targets have taken steps to comply with the requirements under this law.

The ADGM and DIFC also have data protection regimes which require the submission of appropriate notifications to the relevant commissioner of data protection about the nature of the processing of personal data.

(h) Cybersecurity

The United Arab Emirates recently enacted Federal Decree-Law 34/2021 on Combating Rumours and Cybercrimes. At the due diligence level, this will require a review of the cybersecurity policy to ensure compliance with the new law.

(i) Real estate

In the United Arab Emirates, the land register is not publicly accessible and can only be inspected by:

• interested parties;
• judicial authorities;
• experts appointed by judicial officers; and
• other competent authorities.

However, title ownership or validity of a lease can be checked online based on title or lease registration certificates provided by the target.

3.2 What public searches are commonly conducted as part of due diligence in your jurisdiction?

Common public searches involve:

• checking the National Economic Register for basic corporate information about the target and the public registers in the DIFC and ADGM for entities incorporated in these jurisdictions;
• obtaining AECB or Dubai Chamber of Commerce reports; and
• conducting IP registration checks.

3.3 Is pre-sale vendor legal due diligence common in your jurisdiction? If so, do the relevant forms typically give reliance and with what liability cap?

Pre-sale vendor due diligence is uncommon in the region. However, this is likely to depend on the size of the entity and the resources available to the target. As such, vendor legal due diligence is mainly seen in multinational companies in the region.

4 Regulatory framework

4.1 What kinds of (sector-specific and non-sector specific) regulatory approvals must be obtained before a transaction can close in your jurisdiction?

Share sales will generally require the approval of the target's registration authority – that is:

• the relevant emirate's department of economic development for onshore companies; or
• the relevant free zone authority for free zone companies.

This is relatively straightforward and we have not encountered any case in which the relevant authority has denied approval.

Specific regulatory approvals depend on several factors which include the following:

• The activity the business undertakes: Certain sectors require additional government approval other than that of the registration authority for share transfers, such as approval from:
• • the Knowledge and Human Development Authority (KHDA) for educational institutions;
  • the Ministry of Health and Prevention for healthcare entities;
  • the Securities and Commodities Authority (SCA) for public entities offering securities;
  • the UAE Central Bank for financial entities; and
  • the Dubai Municipality for supermarkets.
• In particular, financial institutions have an extensive approval process for a change in shareholders, particularly from an anti-money laundering/know-your-customer perspective. If an Islamic financial institution is involved in the deal, the Higher Sharia Authority, as directed by the Central Bank, may have to be involved.
• Merger control: If the combined market share of both parties to a deal exceeds 40% of the total transactions in the relevant market, a notification must be filed with the Ministry of Economy (Department of Competition).

Non-sector-specific approvals may include informing counterparties and creditors about a proposed change in control further to the deal.

4.2 Which bodies are responsible for supervising M&A activity in your jurisdiction? What powers do they have?

The authorities responsible for supervising M&A activity include the following:

• SCA: The SCA is the securities market regulator in the United Arab Emirates and approves M&A activity for public companies.
• Ministry of Economy (Department of Competition) and Competition Regulation Committee (chaired by the deputy minister of economy): These entities implement Federal Law 4/2012 on Competition and the resolutions issued thereunder. In brief, merger control regulations apply to transactions that result in an economic concentration – that is, where:
• • the total share of the parties to the transaction exceeds 40% of the total transactions in the relevant market; and
  • the deal may affect competition within that market.
• Such transactions require the approval of the minister of economy, who will give the green light based on the recommendation of the Department of Competition.

4.3 What transfer taxes apply and who typically bears them?

No transfer tax or value added tax is payable on share sales in the United Arab Emirates. However, specific transaction fees are payable to the relevant registration authority of the target for the transfer of shares.

5 Treatment of seller liability

5.1 What are customary representations and warranties? What are the consequences of breaching them?

Customary representations and warranties given by the seller are generally broadly divided into fundamental warranties and business warranties.

Fundamental warranties usually cover:

• the seller's capacity, authority and title to shares; and
• the solvency and valid existence of the target.

Such warranties are generally carved out from de minimis thresholds or liability caps and are subject to extended limitation periods.

Business warranties usually cover:

• the target's business;
• licences and consents;
• operations;
• assets;
• financial statements;
• materials contracts;
• compliance;
• anti-bribery and corruption;
• insurance;
• information technology;
• intellectual property;
• employment;
• environment;
• litigation; and
• consents.

A breach of representations and warranties under the transaction document gives the buyer a right to a warranty claim. In some instances, buyers are indemnified for warranty breaches. However, a seller will negotiate to exclude general warranty breaches under the indemnification clause and include only specific identifiable and known liabilities based on the outcome of due diligence.

5.2 Limitations to liabilities under transaction documents (including for representations, warranties and specific indemnities) which typically apply to M&A transactions in your jurisdiction?

The following approaches are usually taken to limit liabilities under M&A transaction documents in the UAE market:

• Disclosure letters: In a disclosure letter, the seller makes disclosures of facts and circumstances which are exceptions to the seller's warranties; and such disclosures are deemed to qualify the seller's warranties.
• Knowledge qualifiers: Knowledge qualifiers limit the scope of a representation and warranty to what the seller knows, such as threatened litigation.
• Liability caps: This is the maximum liability to which the seller is liable for breach of representations and warranties and, in some cases, indemnities. This is generally capped at 100% of the deal value for fundamental warranties and 50% for business warranties.
• De minimis and baskets: The de minimis threshold sets the minimum threshold that an individual claim must meet to qualify for recovery against the seller – this is generally set at about 0.1% of the purchase price. The basket is the minimum threshold that all claims must meet before they can be recovered from the seller – this is typically set at between 1% and 2% of the purchase price.
• Limitation or survival period: This is the period beyond which a warranty claim cannot be made against a seller. This period can range from:
• • seven to 10 years for tax warranties; and
  • 18 months to three years for business warranties.
• Fundamental warranties tend to have unlimited periods, but we have also seen periods of between three and five years.

5.3 What are the trends observed in respect of buyers seeking to obtain warranty and indemnity insurance in your jurisdiction?

For smaller and mid-market deals, warranty and indemnity insurance is not standard in the United Arab Emirates. However, such insurance is gaining popularity for big-ticket matters, particularly during private equity seller exits.

5.4 What is the usual approach taken in your jurisdiction to ensure that a seller has sufficient substance to meet any claims by a buyer?

Various approaches can be taken depending on the nature and size of the transaction. Some options include:

• deferred payment of purchase consideration;
• guarantees from the parent company or related parties; and
• warranty and indemnity insurance.

5.5 Do sellers in your jurisdiction often give restrictive covenants in sale and purchase agreements? What timeframes are generally thought to be enforceable?

Yes, it is common for sellers to agree to restrictive covenants in acquisition documents, including relating to non-compete, non-solicitation and confidentiality. Timeframes range from two to five years from the termination of employment or cessation of shareholding in the target.

5.6 Where there is a gap between signing and closing, is it common to have conditions to closing, such as no material adverse change (MAC) and bring-down of warranties?

Yes, closing conditions are expected in practice. It is customary to restrict the seller from undertaking any actions that:

• are out of the ordinary course of business; or
• deplete the target's value.

Transactions following the 'locked-box' mechanism will have a 'leakage' provision. Finally, warranties are usually required to be repeated on the closing date.

6 Deal process in a public M&A transaction

6.1 What is the typical timetable for an offer? What are the key milestones in this timetable?

For background, there are three stock exchanges in the United Arab Emirates:

• the Dubai Financial Market (DFM);
• the Abu Dhabi Securities Exchange (ADX); and
• NASDAQ Dubai.

The DFM and the ADX are onshore stock exchanges and are regulated by the Securities and Commodities Authority (SCA). Nasdaq Dubai is based in the Dubai International Financial Centre (DIFC) and is regulated by the Dubai Financial Services Authority (DFSA), the financial regulator of the DIFC.

Onshore regime: The typical timetable for an offer under SCA regulations is as follows:

• The offeror notifies the target of its intent to pursue an acquisition.
• The offeror notifies the SCA of its intention to make an offer no later than 21 days from the date of delivering its intent of acquisition to the target.
• The SCA approves or rejects the application within seven days of the date of filing a complete application. If the SCA rejects the offer, the acquirer may appeal within 14 days of the decision.
• The offeror notifies the exchange and the target of the offer document.
• The target – regardless of whether its board of directors endorses the offer – publishes a press release in this regard unless the offeror publishes such release.
• The board of directors of the target notifies its shareholders within 14 days of the date of receiving the offer.
• The first closing date for acceptance of the offer is 28 days from the date of receipt of the offer, unless this is extended to 60 days by the SCA.
• The offeror announces the offer acceptance result no later than the next day after the relevant closing date.
• Applications for the offer acceptance and payment must be settled no later than three days from the date of meeting all conditions, requirements and approvals related to the offer.

DIFC regime: Under the DIFC regime, the typical timetable is as follows:

• A bid must be announced or posted to the target's shareholders within 21 days of the announcement of the firm intention to make a bid.
• The bidder must also give the DFSA one day's prior notice before such announcement by filing the bid document.
• The target's governing body must advise on the bid to the shareholders within the following 21 days of the bid and sharing of the bid document.
• The bidder must ensure that the bid remains open for 35 days from posting the bid document. If the bid is to be extended, the next closing date must be announced or a statement saying the bid will remain open until further notice must be issued. In such case, 14 days' prior notice must be given before the closing date of the bid.
• On the 67th day after posting the bid document, the bidder must announce whether the bid is unconditional or has lapsed.
• The bid must be settled within 14 days of acceptance.

6.2 Can a buyer build up a stake in the target before and/or during the transaction process? What disclosure obligations apply in this regard?

Yes, a buyer can build up a stake before or during the transaction process.

Under the onshore regime, disclosure obligations to the relevant exchange apply for the acquisition of:

• a 5% stake in the target; and
• any 1% increase or decrease in share ownership.

In addition, post-transaction disclosure to the relevant exchange is required:

• where a person or entity acquires a 10% stake in a parent, subsidiary or affiliate of a listed target; and
• for every 1% increase in its shareholding over 10% in the parent, subsidiary or affiliate of a listed target.

Similar disclosure obligations apply in the DIFC, with some modifications.

6.3 Are there provisions for the squeeze-out of any remaining minority shareholders (and the ability for minority shareholders to 'sell out')? What kind of minority shareholders rights are typical in your jurisdiction?

In public M&A transactions, the squeeze-out of minority shareholders can be enforced if:

• the person making the application holds a shareholding of above 90% in the target; and
• the articles of association of the target permit such squeeze-out.

Similarly, in the DIFC regime, an offeror that acquires 90% of the target's shares can buy out the remaining minority shareholders on the same terms as the general offer.

In a mandatory squeeze-out, minority shareholders have limited rights; but in the onshore regime, such shareholders can raise an objection before the court within 60 days of receiving written notification of the acquirer's application. The mandatory offer process is not suspended during the objection, except by a court order.

6.4 How does a bidder demonstrate that it has committed financing for the transaction?

The SCA imposes a general obligation on both the target and the acquirer to appoint financial consultants. An offer announcement by the acquirer must contain a confirmation by its financial consultant that the acquirer has adequate financial resources to execute the offer. In addition, the offer document must include, among other things:

• the sales, cash flows and net profits of the acquirer for the past three fiscal years;
• the acquirer's assets and liabilities based on the latest audited financial statements; and
• any material changes to the acquirer's commercial position since the last audited financial statements.

Similar safeguards are in place under the DIFC regime.

6.5 What threshold/level of acceptances is required to delist a company?

Under the onshore regime, a company can delist itself after submitting a special resolution passed in a general meeting. The SCA can also delist a company under the following circumstances:

• A decision was made to liquidate or dissolve the target;
• There has been a change in the target's main activity;
• There has been a merger of the target with another company that has dissolved the former;
• The target has suspended trading of its shares for more than six months; or
• The target applies to delist its shares by way of a resolution of its general assembly.

Under the DIFC regime, the DFSA or NASDAQ Dubai may delist a security for reasons including the following:

• failure to adhere to the listing obligations;
• failure to publish financial information as per the DFSA rules;
• suspension of the target's securities elsewhere;
• appointment of administrators by the entity;
• winding up of the entity; or
• any other reason that the authorities consider warrants delisting.

Voluntary delisting is also possible under the DIFC regime, after obtaining shareholder approval. The relevant threshold for shareholder approval is not mentioned in the DFSA regulations.

6.6 Is 'bumpitrage' a common feature in public takeovers in your jurisdiction?

Strategising bumpitrage is seen as aggressive and is thus culturally frowned upon; for these reasons, it is not a common feature in the United Arab Emirates.

6.7 Is there any minimum level of consideration that a buyer must pay on a takeover bid (eg, by reference to shares acquired in the market or to a volume-weighted average over a period of time)?

Under the onshore regime, an offer price should not be lower than the highest of the below:

• the market price on the first day of the offer;
• the closing price prior to the first day of commencement of the offer;
• the average price during the three months preceding the start of the offer; or
• the highest price paid by the acquirer to buy the securities in the 12 months preceding submission of the offer.

Under the DIFC regime, a mandatory offer must be in cash or accompanied by a cash alternative at no less than the highest price paid by the bidder (or any person acting in concert) for shares of that class during the offer period and within the preceding six months. In addition, if 10% or shares are acquired, the offer must be in cash or accompanied by a cash alternative at not less than the highest price paid by the bidder (or any person acting in concert) for shares of that class during the offer period and within the six months prior to its commencement.

6.8 In public takeovers, to what extent are bidders permitted to invoke MAC conditions (whether target or market-related)?

Under the onshore regime, bidders can invoke MAC conditions to withdraw an offer. There is not much market practice in this area, but it is expected that any such invocation must be on justifiable grounds.

6.9 Are shareholder irrevocable undertakings (to accept the takeover offer) customary in your jurisdiction?

Irrevocable undertakings are prohibited. A declaration must be made in the offer document ascertaining that there is no irrevocable undertaking to accept the takeover offer.

7 Hostile bids

7.1 Are hostile bids permitted in your jurisdiction in public M&A transactions? If so, how are they typically implemented?

Hostile bids are rare in the United Arab Emirates. Most listed companies are owned by federal or local government entities or influential local families, so any bidder must approach key stakeholders to complete a transaction. In addition, culturally, hostile bids are seen as an aggressive strategy and are thus not market practice.

7.2 Must hostile bids be publicised?

Since all bids and offer terms must be disclosed to the Securities and Commodities Authority (SCA) and stock exchange, hostile bids must be publicised.

7.3 What defences are available to a target board against a hostile bid?

The target board can approach the SCA to block the takeover or increase the offer price.

8 Trends and predictions

8.1 How would you describe the current M&A landscape and prevailing trends in your jurisdiction? What significant deals took place in the last 12 months?

The United Arab Emirates leads the Middle East and North Africa region in terms of M&A activity.

Private M&A activity is on an upward trajectory, due mainly to the increased involvement of sovereign funds, family offices and private equity and venture capital investment funds. Key sectors include:

• technology;
• fintech;
• logistics and transportation;
• healthcare;
• telecommunications;
• real estate; and
• clean power.

Public M&A is not as active as in other global jurisdictions. That said, recent initial public offerings by government entities such as Salik, DEWA and ADNOC Drilling are a telling sign that activity in this sphere is bound to increase.

Some of the important deals that took place in the last 12 months include:

• the sale of NMC Healthcare to its creditors;
• the acquisition of a 9.8% stake in Vodafone Group plc by Emirates Telecommunications group company PJSC (Etisalat) for $4.4 billion;
• the acquisition of a 100% stake in clean power company Masdar, valued at $1.9 million, by the Abu Dhabi national energy company (TAQA), Abu Dhabi National Oil and Gas Company and Mubadala;
• the acquisition of a stake in Tata Power, valued at $250 million, by a joint venture between Mubadala and Blackrock; and
• the acqquisition of a 50% stake in Turkish renewable energy firm Kaylon Enerji Yatirmlari by International Holding Company for $490 million.

8.2 Are any new developments anticipated in the next 12 months, including any proposed legislative reforms? In particular, are you anticipating greater levels of foreign direct investment scrutiny?

The UAE business and legal landscape is constantly evolving, and we anticipate significant policy and legislative reforms aimed at attracting more foreign investors to the country. Some of the new developments and legislative reforms that are expected in the next 12 months include:

• the introduction of corporate tax in 2023 and the issue of legislation in this regard, entailing higher scrutiny of transactions from a tax perspective;
• the introduction of a citizenship law to attract foreigners and investors to the region;
• an increased focus on anti-money laundering/know-your-customer compliance, including ultimate beneficial ownership regulations, due to the United Arab Emirates being placed on the grey list by the Financial Action Task Force; and
• the implementation of a licensing regime and regulations for companies in the digital asset space by the Virtual Assets Regulatory which should increase foegin direct investment (FDI) in the blockchain and virtual asset service provider space.

Since legislative reforms in 2021, 100% FDI is permitted for most activities, with the following exceptions:

• activities in sectors of strategic importance such as defence, security and military activities; and
• financial activities, such as those of banks and exchange houses.

This sweeping change has led to increased levels of FDI and M&A activity since last year.

9 Tips and traps

9.1 What are your top tips for smooth closing of M&A transactions and what potential sticking points would you highlight?

A well-negotiated term sheet or letter of intent sets the tone for the smooth closing of a deal.

In addition, it helps the parties to stay organised by making conditions precedent checklists and closing checklists with a clear delineation of stakeholder responsibilities and the status of each action item.

Sticking points include the logistics of completing the registration formalities for share transfers in onshore or free zone entities, which involves visiting a notary and submitting legalised documents of corporate shareholders. The United Arab Emirates is not a signatory to the Hague Convention, so all foreign documents to be submitted to government authorities require consularisation. This can be time consuming and frustrating, so it helps to prepare documentation well before closing.

Finally, there is a lack of clarity and market practice on the application of merger control regulations to M&A deals.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.