WHICH COUNTRIES EMERGED AS KEY PLAYERS IN M&A TRANSACTIONS IN 2023?
Two countries in the Gulf Cooperation Council (GCC) that stood out as key players in M&A transactions in 2023 are UAE and Saudi Arabia. The UAE had 77 completed M&A deals, showing it was the top player in the region. Saudi Arabia came next with 30 M&A deals, showing it’s also a big part of M&A in the gulf. However, with rising interest rates, inflation, and economic uncertainty weighing heavily on M&A activities, the UAE stayed as the top choice for investments. Government policies and efforts drove deal flow and foreign direct investment into the country.
WHAT ARE THE KEY M&A TRANSACTIONS IN THE GCC REGION?
Q Holding a well-known investment company in the UAE led some of the top M&A transactions during 2023, with a massive merger worth $7 billion. This merger involves combining several entities under ADQ Real Estate, Hospitality Investments, and IHC Capital Holding, including Modon Properties. It also includes merging the Abu Dhabi National Exhibition Company and other assets owned by Q Holding.
Another major M&A transaction was completed by the Jazan Integrated Gasification and Power Company. They bought the Jazan Integrated Gasification Combined Cycle (IGCC) plant from Saudi Aramco for $4.8 billion. Additionally, the Saudi Public Investment Fund and Saudi Basic Industries Corporation signed an agreement to buy shares of Saudi Iron and Steel Company for $3.3 billion.
HIGHLIGHTED M&A SECTORS IN THE GCC
In 2023, the GCC saw a variety of sectors involved in M&A activity and among them, the technology sector dominated, contributing $15 billion to the total MENA deal volume, followed by chemicals with $11.9 billion and provider care with $3.3 billion.
M&A REGULATORY FRAMEWORK IN THE UAE
There are some unique legal complexities in the UAE that businesses engaging in M&A activity need to navigate. It is worth noting that the UAE does operate a robust legal framework in relation to M&A activity which includes laws and regulations that need to be adhered to. Understanding the legal framework for M&A in the UAE and being aware of legislation such as the UAE Commercial Companies Law, the regulations issued by the Ministry of Economy, and the role of regulatory authorities, will support investors desire for a smooth and successful M&A transaction.
UAE’S COMPETITION LAW: SIGNIFICANT CHANGES AND FUTURE DIRECTIONS
On December 29, 2023, a new law called Federal Decree-Law No. 36 of 2023 on the Regulation of Competition (the New Law) was introduced. This law replaced Federal Decree-Law No. 4 of 2012 (the Old Law) and brought in a new way of controlling mergers. It includes concepts where companies involved in M&A must submit filings for merger control. The new law applies to economic activities happening both inside and outside the UAE, especially when these activities might affect competition within the UAE. One notable change in Article 1 of the new law is the broader definition of “relevant market,” which acknowledges that competition can happen in digital spaces and where conditions for competition are similar.
According to Article 1 of the new law, “economic concentration” means any action that involves transferring ownership or usage rights, either fully or partially, of properties, rights, stocks, shares, or obligations from one entity to another. This action results in direct or indirect control over the entity being transferred.
IMPORTANT CONSIDERATIONS FOR M&A IN THE UAE
As the UAE has emerged as a key market for M&A in the Middle East, there are some important aspects that need to be considered in the UAE, that is different from other jurisdictions.
Both private share sales and asset sales are the most common transactions but share sales have proven to be popular as they cause minimal disruption, although due diligence can be challenging as there is often limited public information. Asset sales on the other hand, allow buyers to choose specific assets and liabilities but transferring assets, in particular employees, is logistically difficult.
Certain approvals may be required for private companies depending on the target company’s activity, this will be from education and healthcare authorities as an example. Financial institutions also require extensive approvals, especially regarding anti-money laundering and Know Your Customer (KYC) requirements. In addition, if the combined market share of the parties exceeds 40%, merger control approval will be required from the Ministry of Economy.
A critical part of the M&A process is undertaking due diligence, and this can be quite onerous as there is often little information on public records and the buyer will depend on what information that the seller provides. The National Economic Register will provide basic details on onshore companies, while Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) registers will have more information available. Credit reports can also be obtained from the Al Etihad Credit Bureau (AECB) or Dubai Chamber.
CONCLUSION
The Mergers & Acquisitions (M&A) process in the UAE has become an attractive option for both domestic and international businesses seeking growth. This is supported by government policies aimed at improving the ease of doing business and attracting investment, which remains a top priority. In 2024, we anticipate a significant increase in M&A activity throughout the GCC region, with the UAE and Saudi Arabia continuing to play prominent roles.
At Creation Business Consultants, we offer insights and expertise to guide corporate and private equity investors through the M&A process. From identifying strategic partners to facilitating due diligence and integration, our goal is to support clients in achieving their growth objectives. Our team provides tax advisory and corporate structuring services to ensure organizations involved in M&A transactions minimize tax liabilities and maximize returns.
With careful planning and professional guidance, the risks associated with M&A in the UAE can be mitigated. Creation Business Consultants simplifies the M&A process with the help of experienced consultants, ensuring compliance with regulations and minimizing potential risks.
Email: [email protected] | UAE: +971 4 878 6240 | Saudi Arabia: +966 54 511 2494
