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 dominate the M&A market in the United Arab Emirates, representing a significant proportion of overall activity.

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

Share sales: 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 operate as independent jurisdictions separate from the onshore United Arab Emirates. They follow a common law framework and disputes within these jurisdictions are adjudicated in English, based on English law principles.

Definitive documents in a share sale typically include:

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

Asset sales: Asset sales are less common and can pose logistical challenges, especially when involving the transfer of employees. In the absence of a statutory mechanism for employee transfer, the process involves:

• cancelling existing visas;
• applying for new visas; and
• entering into new employment contracts which treats their employment as continuous.

This can be particularly cumbersome for entities with a significant number of employees.

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

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

• mergers, which can take the 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, 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 they cause minimal disruption to business. The primary advantage is that only the entity's shareholding changes, leaving its licences, ongoing business, employee relationships and asset ownership largely unaffected. However, a drawback is that is that the acquirer cannot selectively choose the assets and liabilities it wishes to acquire. In addition, legal due diligence process in the United Arab Emirates can be challenging owing to limited public information, often requiring heavy reliance on the seller's representations.

An asset sale is typically considered for hiving off a specific business line from a larger group or where the acquirer aims to avoid certain liabilities of the target. The advantage of this approach is the ability for the acquirer to select the specific assets and liabilities for the transfer. However, the process can be logistically challenging, involving:

• the acquisition of new licences (especially if various government approvals are required);
• 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 conducted to determine the sale price. An asset sale might be preferable if the buyer is seeking to avoid certain liabilities.
• Group of companies: The acquisition of a group of entities is generally structured as a share sale, as purchasing a stake in the holding company is a cleaner approach.
• Foreign ownership restrictions: In the presence of sector-specific foreign ownership restrictions, a holding company structure out of the ADGM or DIFC is advisable, with the local owner acting solely as a shareholder, not a director.
• Government licences and approvals: If the target holds existing approvals and licences, a share purchase is more convenient than applying for new licences.
• Business relationships: A business transfer requires the novation of all existing contracts with clients, vendors and suppliers. A share sale might be more efficient if there are numerous contracts.
• Employees: For targets with a significant number of employees, a share purchase is preferred to avoid the complexities 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.
• Tax considerations: With the recent introduction of corporate tax in the United Arab Emirates, it is essential to review the transaction structure from a tax perspective.

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 the following:

• Non-disclosure agreements: Non-disclosure agreements usually cover the subject matter of negotiations and business-specific information that parties might come into contact with during the initial discussions.
• Letters of intent: Letters of intents (also known as 'term sheets' or 'memoranda of understanding') outline the key commercial terms of the transaction. Term sheets can be either binding or non-binding, depending on the parties' agreement. 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 should be capped at 2% of the offer value.

Break fees are generally payable when the target decides to accept an offer from an alternative acquirer, thereby terminating the exclusivity clause under the letter of intent.

When determining break fees, it is customary to consider the estimated costs incurred by the acquirer in conducting due diligence and reviewing the deal.

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

In the United Arab Emirates, transactions are commonly financed through a mix of debt and equity methods.

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 in the United Arab Emirates is prohibited from providing financial assistance to anyone for the purpose of acquiring 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 the buyer and the seller typically engage their own financial advisers, who provide counsel on crucial commercial aspects of the transaction, including valuation and pricing.
• Legal representatives: Both the buyer and the seller are typically represented by legal counsel. The legal team of the buyers conducts the due diligence and drafts the essential acquisition documents.
• Tax advisers: Tax advisers play a pivotal role in determining the structure of the transaction, especially 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 legally restricted from offering financial aid for the purchase of their own shares, a prohibition that typically encompasses the payment of advisory fees. In the context of private M&A, it is customary for each party to shoulder its individual expenses, which are often categorised under the term '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

In the United Arab Emirates, there is no comprehensive public register akin to those found in common law jurisdictions, such as that maintained by Companies House in the United Kingdom. Official public information for onshore companies can be accessed through the National Economic Register, which discloses an entity's registered address and licensed business activities, and the validity of its licence.

Publicly available information on free zone companies, excluding those in the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), is limited. The DIFC and ADGM, as common law jurisdictions, maintain a public register that includes, but is not limited to, a company's registered address, share capital, shareholders, directors and data protection officer.

There is no statutory stamp duty on contracts and electronically signed documents are legally binding and can be enforced in the courts.

(b) Financial

In the United Arab Emirates, information about charges on assets is not typically publicly available. Consequently, buyers often rely on auditors' reports and the seller's representations in connection with the indebtedness levels of the target. However, to obtain a more detailed insight into the company's financial standing, the target can request a credit report from the Al Etihad Credit Bureau (AECB) to provide to the buyer, a government organisation that collects credit and financial data from banks and other financial institutions. 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 the 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 in the United Arab Emirates. 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

Legal due diligence typically involves verification of the target's tax registrations and completion of statutory filings. Comprehensive tax due diligence is usually carried out by the financial team to assess any potential tax liabilities or risks associated with the transaction.

(e) Employment

In the United Arab Emirates, due diligence for most companies with a predominantly expatriate workforce (over 90%) involves ensuring that:

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

The following points are also noteworthy:

• There is no mandatory pension scheme for employees, except for Gulf Cooperation Council nationals and employees in the DIFC.
• Employees are entitled to an end-of-service gratuity which is payable upon termination. A target should ideally have some funds reserved under its books of accounts for this contingent liability.
• There are no trade unions in the United Arab Emirates, which can impact the dynamics of employee relations and negotiations.

(f) Intellectual property and IT

IP due diligence typically involves verification of IP registrations and basic online searches of registered trademarks. A key factor to consider is the prohibitively high cost of IP registration in the United Arab Emirates. This expense often deters small to medium-sized companies and start-ups from registering their intellectual property, as it can significantly increase 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 involves ensuring that the target has 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 parties with a legitimate interest, including:

• parties with a power of attorney from the title holder;
• 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 conducted during due diligence in the United Arab Emirates typically include:

• checking the National Economic Register, which provides basic corporate information about the target such as its legal status, ownership structure and business activities;
• consulting public registers in the DIFC and ADGM for entities incorporated in the DIFC and ADGM;
• obtaining reports from the AECB or the Dubai Chamber of Commerce. Credit reports from the AECB offer insights into a company's creditworthiness and financial history. Similarly, the Dubai Chamber of Commerce and Industry can provide reports on a company's business standing and reputation; 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, particularly for smaller entities with limited resources. In the case of auctions – which are gaining popularity – vendor legal due diligence is more common and there is typically a no-reliance clause, meaning that buyers cannot rely solely on the information provided by the seller and must conduct their own due diligence.

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?

In the United Arab Emirates, the sale of shares in a company generally requires approval from the target's registration authority. For onshore companies, this will be the relevant emirate's Department of Economic Development; while for free zone companies, it will be the relevant free zone authority. This process is typically straightforward and there are no known cases in which such approval has been denied, other than when a party involved in the transaction is subject to sanctions.

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

• The activity that 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 or the Dubai Health Authority or the Department of Health, Abu Dhabi 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 decide 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 which 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.

In M&A transactions, fundamental warranties typically have longer periods compared to other warranties. While it is common for these to have unlimited periods, it is also not uncommon to see periods ranging from three to five years in some agreements. The duration of these warranties often reflects the importance and potential long-term impact of the underlying representations.

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 typically used in the United Arab Emirates. However, such insurance is gaining traction for larger transactions, especially 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 the 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 non-compete, non-solicitation and confidentiality clauses. Timeframes range from two to five years from 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 must usually 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 to 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 not common 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.

While public M&A activity may not be as prevalent as in other global jurisdictions, the landscape is showing signs of growth. This is evidenced by recent initial public offerings by government entities such as Parkin, Dubai Taxi, Salik, DEWA and ADNOC Drilling. Additionally, the proposed listing plans for the Lulu supermarket group and Spinneys Dubai indicate a potential increase in activity in this area.

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

• the acquisition of Univar Solutions by Apollo Global Management and ADIA for $8.2 billion;
• the acquisition of Scopely, Inc by Public Investment Fund-owned Savvy Games Group for $4.9 billion; and
• the acquisition of Cvent Holding by Blackstone and ADIA for $4.7 billion.

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, significant policy and legislative reforms aimed at attracting more foreign investors to the country are anticipated. Some of the new developments and legislative reforms that are expected in the next 12 months include:

• the implementation of corporate tax, entailing higher scrutiny of transactions from a tax perspective;
• relaxation of the requirements for obtaining 'golden visas' – that is, long-term residency requirements in the United Arab Emirates;
• the implementation of a new financial restructuring and bankruptcy law by 1 May 2024;
• the possible implementation of a common law framework across all free zones in Dubai;
• the introduction of a citizenship law to attract foreigners and investors to the region;
• a continued focus on anti-money laundering/know-your-customer compliance, including ultimate beneficial ownership regulations, following the removal of United Arab Emirates from the grey list maintained 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 Authority and the Dubai Financial Service Authority which should increase foreign direct investment (FDI) in the blockchain and virtual asset service provider space.

Since the enactment of 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 since led to increased levels of FDI and M&A activity.

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, making conditions precedent checklists and closing checklists with a clear delineation of stakeholder responsibilities and the status of each action item will help the parties to keep organised.

Potential 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.