Following a series of mergers and takeovers in 2018, the M&A market in the UAE has been in a relative lull ever since. The geopolitical and legislative changes taking place over the past 2 years have caused buyers and sellers to postpone or cancel the majority of their M&A deals in the UAE. Seeing as regulatory mechanisms worldwide (including those in the UAE) are becoming tighter, concluding M&A deals is becoming increasingly difficult and expensive. Therefore, concluding M&A deals in the UAE requires knowing the specifics of such an agreement.
Concluding M&A Deals in the Banking and Financial Sector of the UAE
M&A deals in the UAE are concluded between state-owned or state-controlled companies, including those operating in the banking and financial sector. For instance, a three-party merger executed in the 2nd quarter of 2019 involved the Commercial Bank of Abu-Dhabi, National Bank and Al-Hilal Bank.
Following the merger, the assets of the newly merged banking entity now exceed 400 bln dirhams, making it the 3rd largest lender in the UAE. The merger reflects the desire of the UAE government to give an impetus to this sector. According to the recent media reports, the Dubai Islamic Bank and Noor Bank are currently negotiating a merger. The negotiations are still ongoing and it is not yet clear whether the two financial giants will want to initiate a merger process in the UAE.
General Guidelines for Doing Business in the UAE
The UAE constitution divides governmental powers between the Abu Dhabi-based government and governments of the emirates. Some areas get regulated at the federal level, even though different emirates interpret the same laws differently. Others get regulated at the level of emirates (for instance, each of the emirates gets to control its natural resources, which includes oil and gas reserves). Some areas get regulated at both levels and that, in particular, involves setting up and registering companies in the UAE.
Any business in the UAE is legally required to have a license authorizing its operation in the UAE. Getting one’s company registered requires applying for a license authorizing conduct of business operations in the UAE. Issued by the governments of the emirates, the licenses enable one to perform business activities in the UAE. For instance, a license for conduct of business activities in Dubai enables one to engage in business activities in this emirate. In case the holder of the license desires to undertake commercial activities in Abu-Dhabi, they are to apply for a license authorising business activities in Abu-Dhabi.
Apart from licensing requirements, business in Dubai are to comply with a whole range of other regulations. To be able to engage in business activities, foreign and local companies are to apply for a license authorizing conducting business activities in the UAE.
The UAE also have a number of free trade zones that are not part of the UAE custom zone. Goods imported into the free trade zones are exempted from import custom duties. When goods are imported from the free trade zones to the UAE, a 5% custom duty is imposed on them. Another distinctive feature of the free trade zones is that personnel there gets hired under simplified procedure.
Only state-owned companies are authorized to conclude M&A deals in the UAE. Doing business in the UAE comes with its own challenges, which is why the best way to avoid them is to get qualified advice on doing business in the UAE. If you are considering registering a company in the UAE, getting advice from IQ Decision UK is your best choice!