Corporate mergers in the Middle East

A commentary by Clyde & Co on legal frameworks and strategic insights of mergers in the UAE, KSA and Qatar for enhancing market expansion and operational efficiency.

A corporate merger occurs when two or more companies combine to form a single legal entity. This is typically a strategic decision to increase market share or achieve operational efficiencies by pooling resources and expertise. Mergers enable companies to broaden their footprint, diversify offerings and enhance overall competitiveness in a rapidly evolving marketplace.

In contrast, a corporate acquisition involves one company purchasing a stake in another through acquiring shares or business and assets, often to enter new markets, acquire technology or consolidate industries.

This article addresses corporate mergers in the Middle East, focusing on the United Arab Emirates (UAE), the Kingdom of Saudi Arabia (KSA) and the State of Qatar (Qatar).

UAE: TAX REFORM AND PRIVATE SECTOR CONSOLIDATION

Growing merger activity

While more common among public companies, private company mergers have grown significantly, particularly following the UAE’s new corporate tax regime introduction in 2023. Businesses are increasingly seeking to streamline operations, consolidate structures and enhance compliance.

Notable transaction example

We recently advised on the merger of two education groups operating across multiple Emirates. The transaction required multi-jurisdictional regulatory approvals from the Knowledge and Human Development Authority and the Abu Dhabi Department of Education and Knowledge, compliance with sector regulations and alignment under UAE’s corporate and tax framework. Tax efficiency was a main driver for this particular merger.

Legal framework

The primary legislation governing mergers in the UAE is Federal Decree Law No. 32 of 2021 on Commercial Companies (CCL). This law applies to onshore companies (licensed by the Department of Economy & Tourism in Dubai or its equivalent).

Under the CCL, mergers may occur via:

a)      amalgamation where two or more companies form a new legal entity; or

b)      absorption where one company absorbs another, with the latter ceasing to exist.

Both routes require shareholder approval (typically at least 75 per cent) and a defined process to protect creditors and employees. The CCL only applies to mergers of onshore entities. Free zone companies operate under separate legal regimes. While mergers between onshore and free zone entities are not expressly addressed in the CCL, they can be potentially structured by:

a)      re-domiciling the free zone company onshore (if permitted) then merging under the CCL; or

b)      transferring business and asset from the free zone entity to an onshore entity, subject to approvals.

QATAR: EVOLVING LAWS AND CROSS-BORDER INTEREST

Market developments

Qatar’s M&A landscape has evolved since the global financial crisis. Between 2009-2012, various reforms enabled restructuring of major public and private enterprises. Amendments to the Commercial Companies Law No. 11 of 2015 allowed strategic investors to participate in takeovers and override pre-emption rights.

Legal framework

Qatar’s law allows mergers through amalgamation or absorption, with 75 per cent shareholder approval and required regulatory consents. The Qatar Financial Markets Authority issued M&A Rules in 2014 for public listed companies and their subsidiaries, covering transaction types, disclosure obligations, valuation principles and regulator submissions. Some exemptions may apply.

KSA: STREAMLINED RULES UNDER THE 2022 COMPANIES LAW

Legal framework

Saudi Arabia’s Companies Law of 2022 and Implementing Regulations govern mergers of limited liability and private joint stock companies. Mergers may occur via:

a)      amalgamation;

b)      absorption; and

c)      merger of wholly owned subsidiaries into the parent entity.

Shareholder approval (minimum 75 per cent) is required unless the articles set a higher threshold. The General Authority for Competition may also need to approve mergers involving market concentration risks.

Additional requirements

KSA mergers require:

a)      a valuation report;

b)      a solvency statement for all merging entities; and

c)      repayment or guarantee of creditor debts if objections arise.

KEY STAGES IN THE MERGER PROCESS

Although merger processes vary by structure, size and sector, typical steps include:

a)      Due diligence and structuring: financial, legal, regulatory and operational due diligence to inform valuation, risk mitigation and transaction structure;

b)      Approvals: shareholder special resolution and regulatory approvals from licensing authorities, sector-specific regulators and the tax authorities, possibly anti-competition clearance;

c)      Merger agreement/proposal: defining shareholdings, formalising agreements on terms, including asset/liability transfers, governance and shareholder treatment (often notarised);

d)      Liquidation (for absorption mergers): the winding-up by a licensed liquidator, including creditor notification, contract novation and employee termination;

e)      Valuation and solvency statement: a valuation must be prepared and the merger proposal must include a solvency statement confirming the ability of merging entities to pay their debts;

f)        Creditor notification: a public announcement with objection period is normally required (typically in at least one Arabic newspaper).  KSA requires repayment or guarantees for objecting creditors; and

g)       Final regulatory clearance: after completing the above, the transaction is registered and the new structure becomes legally binding.

STRATEGIC AND PRACTICAL CONSIDERATIONS

When planning a Middle East merger, parties must address:

a)      Jurisdictional complexity: varying rules within jurisdictions, regulator unfamiliarity and onshore–free zone structuring.

b)      Subsidiaries and branches: realignment under the surviving entity to maintain legal and operational integrity.

c)      Employment compliance: obligations under labour laws include end-of-service benefits, visa transfers and employee notifications as labour departments and ministries play key roles.

d)      Lease and contract assignments: obtaining third-party or landlord consents and due diligence to flag any change-of-control clauses.

e)      Banking arrangement: reviewing and potentially novating or terminating of facilities, guarantees and accounts.

f)        Tax compliance: assessing tax implications and seeking advance clearance, especially for large or cross-border transactions.

g)       Regulatory timelines: approvals can be time-consuming, particularly in regulated sectors like education, healthcare and financial services

CONCLUSION

Mergers in the Middle East offer strategic advantages including market expansion, efficiency and tax optimisation. However, each transaction requires careful legal, regulatory and commercial planning. Properly executed, mergers can unlock long-term value, while poor planning can lead to costly delays or compliance breaches.

Text by:

1. Naji Hawayek, partner and head of corporate, Middle East, Clyde & Co, Dubai
2. Ghalya Rashid Ali, legal director, corporate, Clyde & Co, Dubai
3. Sinan Amso, associate, corporate, Clyde & Co, Dubai
4. Elias Matni, partner, corporate, Clyde & Co, Doha
5. Maha Lawson, legal director, corporate, Clyde & Co, Doha
6. Alan Wood, partner, corporate, Clyde & Co, Riyadh