Mergers and acquisitions in the UAE: risks and preparing for a business acquisition

An acquisition can be a way to enter the market through an existing business, to expand, or to let a shareholder exit. But acquiring a company does not mean taking over its authorisations, contracts and banking relationships without conditions.

The central question is not just the price: what are you buying, with which commitments, and under what conditions can the business continue after the transaction? Insufficient due diligence can leave the buyer exposed to tax, contractual or regulatory risks that were not factored into the decision.

Identify the company’s legal framework

A company registered on the mainland, in a free zone or under an offshore regime does not necessarily fall under the same rules. Check the procedures for transferring shares, reporting obligations, the licence and activity-related authorisations.

Full foreign ownership is possible for many mainland activities; it is not an advantage reserved for free zones. Specific conditions still govern certain activities of strategic impact. A free-zone holding company does not, by itself, provide a way around restrictions on the target.

Ownership must also be distinguished from the right to operate. A free-zone licence does not automatically permit every activity throughout the country. In Dubai, the framework adopted in 2025 provides authorisation routes for certain activities outside free zones, provided the relevant conditions are met. It is not a general authorisation valid for all companies and all emirates.

Examine commitments before finalising negotiations

Acquisition due diligence must reconcile the documents with operational reality. Alongside accounts, debts and contracts, examine governance, beneficial owners, licences, VAT, Corporate Tax and relevant personnel and immigration records.

A note on economic substance: reporting and notification obligations under the Economic Substance Regulations were removed for financial years ending after 31 December 2022. Review any obligations that arose for the relevant earlier financial years, from 2019 to 2022. So ESR is not a current annual filing for every target — but historical liabilities still need checking.

Informal arrangements, related-party transactions and undocumented commitments should be identified where they exist. Their presence should not be assumed across all businesses in the region.

Check the target’s tax losses

A change in ownership of more than 50% does not automatically eliminate tax losses carried forward. Article 39 of Federal Decree-Law No. 47 of 2022 distinguishes continuity of ownership—the same persons continuously hold at least 50% of the company from the beginning of the tax period in which the loss arose to the end of the period in which it is used—from the continuation of the same or a similar business following an ownership change of more than 50%.

When assessing business continuity following a direct or indirect ownership change, relevant factors include the use of some or all of the same assets, the absence of a significant change in the identity or core operations of the business and, where there is development, whether it results from developing or exploiting assets, services, processes, products or methods that existed before the change. Article 39(1) does not apply to companies whose shares are listed on a recognised stock exchange.

The other deduction conditions still apply: Article 37 generally limits the offset to 75% of the tax period’s taxable income before deducting tax losses, subject to the adjustments provided for in that article. It excludes, in particular, losses incurred before Corporate Tax came into effect, before the person became a taxable person, and losses relating to income that is exempt or otherwise not taken into account. Carried-forward losses must first be offset against the following period before any remaining balance is carried forward again or losses transferred under Article 38 are used. Separate conditions govern transfers of losses between companies: do not confuse them with carrying forward the target’s own losses. Before reflecting this benefit in the price, verify the available losses and the conditions for using them after the acquisition. Official source: Articles 37 and 39, pages 42–44.

Choose between a share acquisition and an asset acquisition

The first question is what you are buying: shares in the company or certain assets and parts of its business. The consequences differ for liabilities, contracts, employees, licences and taxation.

In a share acquisition, the company remains in place, but change-of-control clauses or sector rules may require action. In an asset acquisition, establish what can be transferred, on what terms and with which consents. Neither structure automatically eliminates risks.

The analysis is not limited to contract law: company law, competition rules, sector legislation and the rules of the competent authority may also apply. Check whether the transaction requires notification or authorisation before completion rather than assuming that a private sale falls outside all controls.

Anticipate merger control

The thresholds are not simply a matter of the transaction price. Article 12 of Federal Decree-Law No. 36 of 2023 requires an application to the Ministry at least 90 days before completing a concentration that falls within its scope. Under Article 3 of Cabinet Decision No. 3 of 2025, either of the following thresholds is sufficient:

• the total annual sales value of the undertakings concerned in the relevant UAE market exceeds AED 300 million during the last financial year; or
• their combined share exceeds 40% of transactions in that relevant UAE market during the last financial year.

These thresholds must be strictly exceeded; they do not mean “at least” those values. They concern data for the relevant market within the country, not merely global turnover or the purchase price. For each transaction, assess the definition of a concentration, the relevant market, the scope of the rules and any exclusions. During the review provided for in Article 13, the undertakings must not take steps that implement the concentration; the filing deadline is not a guarantee of a decision within 90 days. Also check the procedural requirements against the implementing regulation in force. Decree-Law, Articles 12–14, pages 9–11; Decision No. 3 of 2025, Article 3, page 2.

Arrange contractual protections

The contract may include seller representations and warranties, indemnities, conditions precedent, a retention from the price, an escrow payment or an earn-out linked to future performance.

These mechanisms are useful only if they address identified risks and have realistic enforcement arrangements. Review the scope of a non-compete clause, the conditions for releasing escrow funds or the calculation of an earn-out against the legal framework governing the transaction. They do not provide automatic protection.

Check approvals and the completion procedure

The steps depend on the emirate, legal form, activity and nature of the transaction. In a regulated sector, a change of control or licence transfer may require the competent authority’s approval. Identify the precise trigger and when the application must be made, without assuming that every transaction in a given sector follows the same procedure.

The DIFC and ADGM have distinct legal and regulatory frameworks. Consult the rules governing the company and, if it is regulated, those of its supervisory authority. A general reference to common law does not replace this check.

Depending on the procedure, documents in Arabic, authentication or registry formalities may be required. Build the timetable around the transaction’s actual conditions, rather than a standard timeframe announced in advance.

Prepare for continuity after the acquisition

Before signing, allocate responsibility for subsequent steps: updating registers and beneficial ownership information, signatory powers, banking relationships, licences, leases, contracts and personnel records.

Check immigration and Emiratisation obligations against the company’s circumstances. They do not apply identically to every target. The transaction’s tax treatment and filing obligations also require case-specific analysis rather than a general promise of low taxation.

An acquisition is not necessarily faster or safer than setting up a new company: it depends on the target’s quality, liabilities and conditions for continuity.

Discuss your acquisition project

Are you considering an acquisition, a sale or bringing a partner into the ownership of a UAE company? Tell Garant Business Consultancy about your project in a free first consultation. Any further work is scoped and priced separately. The necessary legal, tax and regulatory work is defined for each transaction with the appropriate professionals.

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