The Cyprus M&A market has been influenced by global macroeconomic conditions, including geopolitical tensions, sanctions, high interest rates that are gradually receding, and global uncertainties. However, over the last 24 months there has been a continuing trend of increasing M&A activity. In the last 12 months, we noted a few key transactions involving strategic buyers (particularly in the financial services sector and retail sector). A large proportion of deals, however, has been driven by financial sponsors who typically adopt a ‘thematic’ approach to investing in Cyprus, with notable activity in the acquisition of portfolios of Non-Performing Loans (NPLs) and Real Estate Owned properties (REO), healthcare, education and hospitality and real estate, as well as in financial services and investment management, telecommunications, and renewable energy.

An upward trend in global M&A coupled with the stability of the country’s financial sector and an ‘untapped’ local deal flow, with an increasing number of Cypriot businesses reaching maturity without clear exit strategies or available liquidity, create a positive outlook for local M&A activity and, possibly, an upward trend of PE deals in Cyprus.

This country guide focuses on the Cyprus domestic M&A market. However, for completeness, we note that, in addition to the Cyprus domestic M&A market, Cyprus is a fairly well-established holding company jurisdiction for international corporate groups with operations and assets predominantly or entirely outside of Cyprus. Accordingly, Cyprus has continued to be involved in various high profile international PE deals – usually in transactions where the target group is owned through or acquired by a Cyprus holding company. A substantial proportion of such transactions has involved financial sponsors on the buy-side and/or sell-side. The frequency and volume of such transactions is typically led by market developments within the jurisdictions where the transaction parties and/or the target are based and international markets.

Consistent with other European jurisdictions, private equity sellers are generally focused on achieving a ‘clean exit’ by ensuring price certainty and limiting post-closing financial liabilities. Consequently, the key distinctions concern: (i) pricing mechanisms; (ii) earn-outs; (iii) withheld consideration; (iv) warranties and indemnities; and (v) restrictive covenants.

For private equity sellers, locked box accounts provide pricing certainty on signing and simplify bid comparisons in competitive auctions. By contrast, in trade seller transactions, completion accounts may be more appropriate (especially where there is a carve-out or pre-closing reorganisation or separation). These may be combined with earn-outs linked to certain financial and/or performance milestones which may be used both to incentivise trade sellers that continue to be involved in the management of the target group, as well as to bridge any valuation gap between the buyer and the seller. Similarly, deferred or withheld consideration or escrow arrangements for future liabilities will usually be resisted by PE sellers.

In line with the ‘clean exit’ principle, the scope of warranties and indemnities (both specific indemnities for identified liabilities and general indemnities for pre-completion liabilities) tends to be limited for PE sellers, who prefer to have such risk priced in. By contrast acquisitions from trade sellers typically involve a broader list of warranties and indemnities and entail a more complex disclosure exercise.

Finally, unlike trade sellers who, in many cases, may continue to be involved or operate in the target’s industry or sector and who will be expected to give certain non-compete and non-solicit undertakings, a PE seller will not accept any restrictive covenants.

For Cyprus private companies limited by shares, a properly executed instrument of transfer of shares must be delivered to the company in order to register a transfer of shares. The share certificates in the name of the seller will be delivered to the company for cancellation and the target will issue new share certificates in the buyer’s name and update its corporate registers, including the register of members. Under the Cyprus Companies Law, the register of members is prima facie evidence of share title. Typically, the target’s board of directors will also pass resolutions to approve the transfer and any other agreements or actions relating to the acquisition. Other closing conditions can include resignation and replacement of directors and secretary, delivery of financial statements and accounting records, tax filings and/or tax clearances, as well as deal-specific closing deliverables in connection with the company’s assets or to address specific issues identified through the buyer’s due diligence exercise. Finally, a share transfer notification bearing a nominal cost must also be made to the Cyprus Registrar of Companies, although this is not a condition for the title to pass to the transferee.

The transfer of shares in public companies is broadly similar. A transfer of shares in a listed company requires additional formal or alternative steps and typically occurs through an electronic clearance system and, in relation to shares listed in foreign capital markets, must take place in accordance with the law and/or regulations of the relevant market.

It is worth noting that Cyprus established a central beneficial owner register of companies and other legal entities (in line with EU AML Directives and the Cypriot Prevention and Suppression of Money Laundering Activities Laws). A change in the beneficial owner(s) of a company must be registered within 14 calendar days, including on a share transfer. Failure to comply can result in penalties

In M&A transactions, specialised tax and structuring advice should be sought from tax experts. Broadly, no direct taxes are triggered by the sale of shares in a Cyprus private company (provided it does not own any real estate situated in Cyprus). Furthermore, as of 1 January 2026, stamp duty (broadly, a tax payable on key transaction documents such as the SPA) has been abolished.

If the buyer is a special purpose vehicle (SPV) with no substance, the buyer may be required to provide an equity commitment letter and, if there is debt financing involved, a debt commitment letter (which may be accompanied by a binding term sheet or an interim facility agreement) unless the sponsors agree to equity underwrite the entire purchase price at signing.

Other than giving an equity commitment letter, financial sponsors are unlikely to agree to a parent guarantee from the ultimate fund but, for bolt-on acquisitions by PE-backed portfolio corporate groups, a parent guarantee by the group’s holding company, accompanied by the guarantor’s financial statements or other evidence of substance, may suffice.

In recent years, buyers have been favouring the use of completion accounts, both from a practical perspective (where (i) the target business experiences seasonal fluctuations in sales or working capital or its proceeds are otherwise subject to high volatility, (ii) a pre-closing business reorganisation or carve-out or separation is required and/or (iii) there are no reliable recent financial statements available), as well as generally due to a more buyer-friendly market, greater familiarity with the completion accounts construct in the local Cyprus market and general uncertainty in the market environment.

The locked-box model, however, may be advantageous for private equity investors both on the sell-side and the buy-side, as it provides for purchase price certainty, permitting both an accurate calculation of equity commitments on the buy-side and the immediate distribution of funds on the sell-side.

Similar to other jurisdictions, the typical way of allocating risk between a buyer and a seller is through the use of representations and warranties under the SPA. These are supplemented by general and specific indemnities. General indemnities for pre-closing liabilities are usually requested for tax and, in certain cases, environmental liabilities, litigation and/or employment risks, whereas specific indemnities may be negotiated for specific risks identified during the due diligence exercise and that have not been otherwise priced in by the buyer. The proper alignment of the warranties and indemnities under the SPA (including caps on liability, de minimis amounts and time limitations) with the buyer’s due diligence findings, coupled with a robust disclosure exercise with the seller and the target’s management is key. However, where a PE seller is involved, and in line with the ‘clean exit’ principle, the seller will only stand behind the fundamental warranties (title, capacity, authority, and solvency) and the buyer may need to explore the availability of W&I insurance to enhance warranty protection.

A second risk allocation mechanism is the pricing structure. In a private equity transaction, a seller will insist on the use of a locked box consideration mechanism which provides certainty on pricing. In these circumstances, the buyer will need to safeguard their investment by negotiating strong leakage provisions and ensuring the EV to equity bridge is contractually safeguarded under the SPA. Conversely, a buyer may shift the risk to the seller by insisting on the use of completion accounts and, potentially, the inclusion of a deferred payment or earnout to ‘underwrite’ the target’s future performance.

Finally, certain areas of concern may be tackled through the use of conditions precedent or pre-closing obligations on the seller to rectify any areas of concern identified during the buyer’s due diligence exercise. Frequently, buyers will also insist on Material Adverse Change (MAC) clauses, pursuant to which the buyer may withdraw from the transaction if there are certain significant negative changes in the period between signing and closing (for example, a material reduction in sales, turnovers, or annual operating profits).

W&I insurance is not customary or widely used or available in Cyprus although this position may change. On the supply side, increased M&A activity and consolidation in the Cypriot insurance market may have an impact on the availability of W&I insurance offerings, whereas, as larger, cross-border deals become more common, there is increased demand for W&I solutions to bridge negotiation gaps.

There is a clear advantage in the use of W&I insurance and, for high value transactions, it may be an efficient way to align the position of buyers requiring increased warranty protection and sellers seeking a clean exit although, conversely, involvement of insurers may lengthen and complicate the due diligence exercise and contract negotiations.

The availability and terms of W&I insurance will vary depending on various factors including local and/or international insurers’ risk appetite to underwrite Cyprus deals, transaction size, target industry and the quality of the due diligence exercise.

Overall, financial sponsors investing in the Cyprus market have been mainly focused on the private market without notable activity in publicly traded companies. It is worth noting that a number of publicly traded companies in Cyprus are still controlled by founders and ‘insiders’ with limited free float making hostile takeovers impossible.

Other than merger control and certain regulated sectors (such as banking, insurance and investment) where the approval of the relevant regulatory public authority may be required, and subject to the below on the introduction of a comprehensive FDI screening regime with effect from 02 April 2026, there are, as at the date of this publication, no existing specific restrictions (such as minimum investment amounts or maximum participation percentages) on or governmental consents required for foreign nationals owning shares in a Cyprus company, although the Council of Ministers of Cyprus has a residual power to limit direct investments in the Republic of Cyprus on account of public order, national security, national health, or restricting or prohibiting the manufacture or trading of weapons, firearms or other warfare materials. We are not aware of instances where the Council of Ministers of Cyprus has exercised its discretion under these limits.

Under the Ownership of Real Estate (Aliens) Law, Cap. 109, special procedural requirements (including the prior permission of the Council of Ministers) apply to the acquisition and ownership of immovable property by (non-EU) third country nationals, including through the acquisition of shares in a Cyprus registered company which owns real estate in Cyprus.

In addition, transactions in Cyprus are subject to applicable anti-bribery and money laundering regulations, in compliance with equivalent EU directives and regulations. Restrictions on ownership may apply on sanctioned individuals falling within the ambit of these regulations.

As a member state of the European Union, Cyprus must comply with the EU’s Foreign Direct Investment (FDI) Regulation and set up a comprehensive FDI screening regime. In October 2025, Cyprus enacted the Law for the Establishment of a Framework for the Screening of Foreign Direct Investments 194(I)/2025, which will introduce foreign investment controls when it enters into force on 02 April 2026. Amongst other things, the new law creates a mandatory notification regime for foreign direct investments of value equal to or exceeding EUR 2 million in connection with acquisitions of a qualifying holding (i.e. 25% of share capital and/or voting rights, or equivalent control) in an entity of strategic importance. Critical sectors deemed to be strategically important include, inter alia, energy, transport, media, data processing and storage, education, healthcare, defence, real estate of critical importance, and banking services. Notifiable transactions require the prior authorization of the Ministry of Finance, which has the power to approve, conditionally approve, prohibit or reverse such investments on national security or public order grounds.

In the context of the buyer’s due diligence exercise, the buyer will require from the target and the seller all relevant information to enable it to determine if merger clearance is required.

If required, merger control clearance will typically be a condition precedent to closing. To ensure deal certainty, the seller may require a ‘hell or high water’ commitment from the buyer, although a PE buyer will limit any such commitment to the target structure and not accept any disposal obligations vis-à-vis portfolio investments. Also, the SPA will provide for the seller’s obligation to provide all necessary assistance to the buyer (including the provision of detailed financial and other information) in order to prepare and submit the necessary filing for the purposes of merger control clearance and, conversely, the seller will require the inclusion of provisions to allow it to closely monitor the merger clearance process.

Regarding Cyprus, a notification to the Commission for the Protection of Competition (the CPC) is required for any concentration of major importance. The jurisdictional thresholds for a concentration to be of major importance are met if: (i) the aggregate worldwide turnover achieved by at least two of the undertakings concerned exceeds, in each case, €3.5 million; (ii) at least two of the undertakings concerned achieve a turnover in Cyprus; and (iii) at least €3.5 million of the aggregate turnover of all undertakings concerned is achieved in Cyprus. Notification of concentrations of major importance to the CPC is mandatory.

Other than in venture capital, we have not seen any significant activity in minority investments by financial sponsors, whilst these are mainly relevant in real estate and hospitality and technology. Minority investments are typically structured as equity investments with minority protection rights, with debt-like, hybrid or convertible instruments being more prevalent in venture capital or investments in the growth equity sector.

Cyprus is a ‘developing’ private equity market and, accordingly, we have not observed any significant GP-led secondaries or continuation fund activity.

Senior management share plans are typically in the investment holding structure in the form of non-voting shares or a separate class of shares with specific economic rights. Employee participation may be direct or through a pooling vehicle.

Generally, use of management incentive or employee equity plans or other profit-sharing practices is not widespread in Cyprus companies, with a number of local businesses relying on a more traditional discretionary or performance-based bonus structure. Additionally, there is no specific regulation or special rules on employee incentive plans (other than limited exceptions to certain company law principles to facilitate employee participation).

However, with effect from 1 January 2026, the new tax reform introduced favourable taxation for employee or director benefits in the form of share option rights or rights for the acquisition of shares. Please refer to our response in question 13 below.

Accordingly, when structuring management incentive plans through Cyprus, specialised legal and tax advice is required to ensure the company’s needs and the buyer’s business plan and exit strategy are aligned with applicable Cyprus laws and regulations including Cyprus Companies Law and taxation and employee benefits.

Granting of stock options or similar benefits are, generally, taxed as part of salaried income as a ‘benefit in kind’ (with a tax circular from the Cyprus Tax Department offering guidance on the calculation of the taxable benefit and timing of taxation). Profits from the sale of securities (including shares, bonds and debentures) are generally exempt from capital gains tax (please refer to question 3 above).

However, as of 1 January 2026, employee/director benefits in the form of share option rights or rights for acquisition of shares, and approved by the Tax Commissioner for such employee/director, are subject to a favourable flat tax rate of 8% provided, broadly, such rights/options: (i) have a minimum three-year vesting period from the date of approval of the scheme; (ii) cannot be transferred prior to expiry of the vesting period; (iii) are related to the shares of the employer or a holding company and carry the same rights as the ordinary shares of the issuer (other than voting rights); and (iv) have a minimum exercise price of at least 50% of the share value at the time the scheme is approved. The flat tax rate only applies to the part of the benefit not exceeding an amount equal to two times the remuneration from employment earned by the relevant employee/director in the year of vesting, excluding the benefit, and is capped at EUR 1 million over a rolling ten-year period of employment.

In M&A transactions and the introduction of management incentive plans, specialised tax and structuring advice should be sought from tax experts.

It is not uncommon for senior managers to give non-competes and other post-termination covenants (including non-solicits and confidentiality covenants). Restrictive covenants may be included in service agreements, SPAs (where a manager is also a seller) and/or shareholders’ agreements (for investing or reinvesting managers) and such obligations will often overlap in both scope and duration. Restrictive covenants under employment contracts will typically run for a period of 6 to 12 months from termination of employment.

There are uncertainties as to whether such restrictive covenants are enforceable under Cyprus law except to the extent that they are strictly limited and absolutely justified. The scope of such restraint of trade clauses has not been examined in detail by the Supreme Court of Cyprus. Generally, parties will seek to limit the scope (both scope of restricted activities and geographically) and the duration of such restrictive covenants to ensure the restrictions are reasonable and serve to protect legitimate business interests (in line with guidance from English courts and other common law jurisdictions).

Financial sponsors will typically hold a majority of the voting rights (over 75%) and maintain effective shareholder voting control. Additionally, the financial sponsor may introduce additional controls including positive covenants and veto rights over key decisions (including share capital, capital expenditure and borrowing), enhanced information rights and control of the board of directors.

The use of management pooling vehicles or a nominee or trustee arrangement is not regular in Cyprus. However, the drivers for such structures are practical to ensure streamlined corporate governance and for financial sponsors to retain full control of the exit process. Accordingly, increased ownership of Cyprus businesses by financial sponsors may result in more widespread use of both senior management share plans and the use of management pooling vehicles or nominee arrangements.

In large capital financings (which are typically in the context of high value acquisitions by reputable, non-Cyprus based international private equity sponsors), the most commonly used source of financing is in the form of syndicated loans or other private credit facilities arranged through the sponsor’s relationship banks.

In small to medium capital financings (which are typically in the context of small to medium value acquisitions by domestic or regional sponsors), where these are funded by debt, these are commonly financed through bilateral credit facilities by banks operating in Cyprus.

Yes, there are applicable financial assistance rules in Cyprus. In brief, these contain a prohibition on the provision of financial assistance by a Cyprus company, directly or indirectly, by means of a loan, guarantee, security or otherwise, for or in connection with the purchase of or subscription for its own shares or those of its direct or indirect holding company (as further defined in the relevant legislation).

Where the general prohibition applies, a whitewash procedure is available in respect of private limited companies if: (a) the private company is not a subsidiary of a public company; and (b) the transaction was approved in a general meeting by a shareholders’ resolution representing a majority of 90% of the issued share capital of the company. Other limited exceptions to the general prohibition are also available, though these are not typically relevant in the context of private equity M&A transactions (covering, for example, ordinary course activities and financing employee incentive schemes).

In private equity M&A transactions, the whitewash procedure is usually available to sponsors and therefore, where financial assistance is given by a company, it is normally whitewashed through that procedure.

Large capital credit agreements are typically governed by foreign law (usually English law) and prepared and negotiated through international lead transaction counsel, with Cyprus counsel supporting on matters of Cyprus law. In our experience, the level of negotiations on such agreements is usually material, though the extent varies between transactions depending on a variety of factors. The most relevant factor is usually the bargaining strength of the sponsor.

Small to medium capital credit documents are typically prepared by domestic banks and there is relatively less negotiation on their terms. Negotiations on such agreements are typically focused on commercial terms (such as pricing, repayment terms, main financial covenants and the scope of the security package).

In the context of large capital financings, these vary and typically follow market developments in the jurisdictions where sponsors and lead transaction counsel are based. In the context of small to medium capital financings, please refer to our response in question 19 above.

We have seen an increase of private equity credit funds as sources of debt capital in large capital financings. These are currently not common in small to medium capital financings.