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Expansion and competition are two of many reasons. A business must adapt while reducing expenses when it faces competition. Acquiring rival companies is one way to make them less of a threat. By acquiring additional product lines, intellectual property, human resources, and customer bases, businesses use M&A to grow. Combining business operations usually results in improved overall performance efficiency and decreased overall costs as one company makes use of the advantages of the other.

Creation Business Consultants offer a free expert consultation to discuss and oversee your business’s M&A process. Book your consultation today via email at [email protected] or call +971 4 878 6240.

Our Merger & Acquisition consultants have the insight and experience to advise corporate and private equity investors through the M&A process. From introducing strategic partners, preparing investor packs, forming strategies, and due diligence to integration or divestiture, we provide solutions to support you to achieve your growth objectives.

We will assist you in assessing and evaluating the target, its market, and the competitive climate, whether your target firm is headquartered in the UAE or is international.

For expert consultation and benefit from our expert assistance when it comes to financing and acquisitions, contact us at [email protected] or call +971 4 878 6240.

Through careful planning and professional advice, the minimal risks connected to Mergers and Acquisitions in the UAE can be reduced. You can handle the Mergers and Acquisitions procedure easily with the assistance of professional consultants, ensuring adherence to legislations and reducing potential risks.
For an expert consultation, contact Creation Business Consultants via email [email protected] or call +971 4 878 6240 today.

In the UAE, private M&A transactions are typically structured around share sales. This involves transferring ownership of shares in exchange for cash. Transactions can either involve buying all the shares of a company or just a certain percentage. Recently, there has been a trend towards deals where payment is made over time, especially in venture capital and early-stage deals. Additionally, there has been a rise in asset acquisitions, where buyers select specific assets to purchase instead of acquiring the entire company.

In M&A transactions, share sales and asset sales represent two primary structures, each with distinct characteristics and potential outcomes. Share sales involve the transfer of ownership of shares, resulting in minimal disruption to the target’s business operations. However, buyers may face the risk of assuming all liabilities of the target entity unless specifically carved out in the transaction documentation. This risk underscores the importance of due diligence, especially considering the limited public information available in the UAE. On the other hand, asset sales allow buyers to select specific assets and liabilities to acquire, providing more control over the transaction.

Nonetheless, asset sales often require tripartite agreements for asset transfer, which may not automatically occur, and regulatory approvals may be necessary, particularly for assets in regulated sectors. These factors should be carefully considered by parties involved in M&A transactions to determine the most suitable structure for their objectives and risk tolerance.

The choice of transaction structure often depends on whether the buyer wants to take on all assets and liabilities of the target or only specific assets. Additionally, if the buyer aims to merge the target’s business with its own, a statutory merger might be preferred. In auction processes, buyers must consider if they are comfortable with limited control over the transaction’s pace and if they’re willing to invest significant time and resources without a guarantee of being selected. Limited information availability during auctions, especially in the UAE, adds complexity. Sellers, on the other hand, must decide if they want more control over the process and if they prefer having access to multiple potential buyers in case the preferred one backs out.

At the start of a private M&A deal, parties usually sign two main agreements:

• NON-DISCLOSURE AGREEMENT (NDA): This agreement ensures that buyers keep sensitive business information confidential and refrain from sharing it.
• PRELIMINARY AGREEMENT: This document outlines the key terms of the deal. It can be binding or non-binding, with non-binding agreements being more common in the UAE. However, even non-binding agreements may include legally enforceable terms, especially regarding confidentiality and exclusivity. It’s worth noting that enforcing binding terms in the UAE courts can be challenging, as they typically do not grant specific performance or injunctive relief. Therefore, it’s advisable to have preliminary agreements governed by the laws of the DIFC or the ADGM, where such remedies may be available.

In M&A transactions, buyers usually conduct legal and financial due diligence on the target company. Depending on the target’s industry and nature of business, additional specific due diligence may also be performed.

Legal due diligence involves thorough reviews of various areas, including but not limited to:

• Corporate Structure and Licensing.
• Tax and Compliance.
• Accounts and Financial Arrangements.
• Real Estate and Assets.
• Insurance, Litigation and Disputes.
• Key Contracts, Intellectual Property, and IT.
• Employment.

Buyers should consider the areas of the business they want to investigate, allocate sufficient time, and budget for the process, and assess their risk tolerance and familiarity with the region and industry. For cost-conscious buyers, a red-flag due diligence, focusing on key concerns like foreign ownership restrictions and regulatory issues, is becoming more common to streamline costs.

Shareholder and corporate approval are typically required for both share and asset sales, as per UAE Commercial Companies Law. Shareholders of limited liability companies usually have pre-emption rights. Notarized powers of attorney are necessary for individuals executing local transfer documents on behalf of corporate parties. Regulatory approvals may also be needed, depending on whether the entity is onshore or in a free zone. Free zone transactions often require approval from the relevant free zone authority, while mainland and free zone companies require updated commercial licenses from the respective licensing authorities.

The main documents for a private M&A share sale include the sale and purchase agreement (SPA), usually drafted by the buyer, and a disclosure letter by the seller. Additionally, there are documents like the share transfer and amendments to the target’s memorandum of association, typically drafted by the buyer (its representative). Each party also prepares its own corporate approvals.

In asset sales, agreements for transferring specific assets are needed, such as novation’s of contracts and real estate transfers. Other documents may include shareholder agreements and transitional service agreements, typically drafted by the party owning the majority stake and the buyer’s legal team, respectively.