Over the last 24 months, the UAE has remained the most active M&A jurisdiction in the Middle East by both deal count and aggregate value. Based on publicly disclosed transactions through 2024 and into 2025, total M&A activity in the UAE is estimated to be in the low-to-mid hundreds of deals annually, with aggregate disclosed deal value in the tens of billions of US dollars, driven by a combination of inbound, outbound and domestic transactions. Activity in 2025 has been particularly strong in the first half of the year, with large strategic and infrastructure-related transactions contributing materially to overall value, including high-value digital infrastructure and industrial deals. Despite this scale of activity, transactions involving traditional private equity financial sponsors as buyers or sellers continue to account for a relatively limited proportion of overall UAE M&A, particularly when measured by deal count. The market remains dominated by sovereign wealth funds, government-related entities, family offices and strategic corporate buyers, which continue to drive the majority of large-cap transactions.

Within the private capital universe, venture capital transactions significantly outnumber private equity deals by volume, reflecting the UAE’s position as a regional hub for early- and growth-stage technology and startup investment, where numerous smaller funding rounds are completed each year. By contrast, private equity transactions are fewer in number but materially larger in average deal size, and therefore account for a greater share of aggregate private capital deal value rather than deal count. Overall, while financial sponsors are active and increasingly visible in the UAE market, particularly in growth equity, infrastructure-adjacent and structured minority investments, sponsor-led buyouts and sponsor exits remain a minority component of total UAE M&A activity over the last 24 months.

Upon an exit, the aim of a financial sponsor seller would typically be to achieve a clean break to enable a distribution of sale proceeds to the fund as soon as possible. Accordingly, a financial sponsor would generally seek to implement a locked box purchase price mechanism in order to achieve price certainty rather than a completion accounts mechanism, which would involve a potential purchase price adjustment and may result in a holdback of proceeds. Furthermore, a financial sponsor typically seeks to limit the warranties contained in the sale and purchase agreement to fundamental title and capacity warranties only.

In practice, however, the extent of warranty coverage offered by a financial sponsor remains highly negotiable and is assessed on a deal-by-deal basis, taking into account factors such as the size and nature of the transaction, the competitiveness of the process, the quality and scope of diligence undertaken, the extent to which the sponsor has been operationally involved in the business, and whether the sponsor has backed the management team. While sponsors will generally seek to limit their residual exposure as far as possible, including by tailoring warranties to specific diligence findings, there is no settled benchmark in the UAE market as to the level of warranty protection to be provided by a financial sponsor.

By contrast, trade sellers in the UAE are often less experienced in private equity-style warranty frameworks and the associated allocation of risk, and their approach in practice is frequently shaped by the advice received from their legal and financial advisers. As a result, outcomes can vary materially depending on the sophistication of the advisory team involved. That said, where a trade seller is expected to retain or assume ongoing management responsibility for the target business, it is generally easier in practice to persuade such sellers to stand behind broader business warranties and to provide more detailed disclosures, subject to customary limitations on liability. In this context, warranty and indemnity insurance is commonly used to bridge differences in risk appetite and to facilitate agreement where a financial sponsor seeks to limit residual exposure while the buyer requires a more comprehensive warranty package.

A transaction involving a UAE company will (where relevant) typically require competent authority approval in respect of the application in relation to a transfer of shares. Limited liability companies, which are the most common form of company through which business activities are performed “onshore” in the UAE, are licensed and regulated by the local economic department of the Emirate in which they are established. Local economic departments are responsible for maintaining the Commercial Register, and their procedural requirements must be satisfied in order for a person to be registered as a legal shareholder (noting that their requirements can change so it is important to get up to date information as to current processes). Similarly, free zone companies are regulated by the relevant authority of the free zone in which they are established.

Furthermore, in order to effect an “onshore” share transfer (and certain free zone share transfers also), shareholders are required to use a notary public in order to sign (although this process is increasingly being conducted remotely by way of a video call) and have the relevant documentation and an updated memorandum of association notarised before they are submitted to the competent authority. Effecting a share transfer of a UAE “onshore” company, therefore, generally requires the cooperation of all shareholders. It is important for buyers and sellers to note that due to the requirements to have documents notarized, there may also be a need to have certain buyer and seller constitutional documentation notarized and attested in the relevant country of origin which could add several weeks to the share transfer process – therefore this added delay should be factored into the overall transactional timeline (and the same applies to free zone transfers referred to below).

In certain Emirates (e.g. Abu Dhabi), advertisement of summary details of any proposed share transfer is a mandatory step in the share transfer process. However, such advertisement is usually in the public Gazette which is not widely read or reported on.

There is currently no general transfer tax applicable to transfers of shares in the UAE. Competent authority registration fees will apply and, in respect of transfer of shares in “onshore” companies, notarial fees will also apply, however such fees are not material. Notary public fees in Dubai are specified by the Dubai Court to be 0.5% of the value of the shares being transferred, subject to a cap. It is market practice to assess value on the basis of the nominal value of the shares being transferred. Whilst a sponsor would typically acquire shares in a holding vehicle incorporated in the Dubai International Financial Centre or Abu Dhabi Global Market, it may be necessary to transfer an “onshore” operating company under such vehicle.

Moreover, where a company owns an interest in land onshore in Dubai (whether directly or indirectly through subsidiaries), and the shares in this company are transferred to a third party, the Dubai Land Department views this transfer as a transfer of a real estate interest upon which registration fees of 4% of the value for freehold or usufruct (long leasehold) properties will be assessed. There is also a risk that other Emirates will apply this procedure.

Financial sponsors in the UAE commonly acquire target companies through special purpose vehicles established specifically for the purposes of the acquisition. The level of comfort required by sellers in this context depends largely on the overall transaction structure and, in particular, on whether an escrow mechanism is used. Where no escrow is involved, sellers will typically require certainty of funding to be demonstrated through the provision of an equity commitment letter or similar comfort letter delivered at signing, pursuant to which the sponsor commits to inject sufficient equity into the acquisition vehicle to fund the purchase price or the equity component thereof. The scope and enforceability of such commitments are often negotiated by reference to the long-stop date and the conditions to completion under the transaction documentation.

Where an escrow arrangement is used, the position can be different, as the escrow mechanism itself is designed to provide funding certainty by requiring funds to be deposited into the escrow account either at signing or upon satisfaction of conditions precedent, depending on the agreed structure. In such cases, the escrow arrangements may provide sufficient comfort to sellers such that additional equity commitment documentation is less critical. In practice, the extent to which formal funding comfort is required will also depend on the profile and track record of the financial sponsor involved, and in transactions involving well-established and active sponsors in the region, funding certainty issues do not always materialise as a significant point of negotiation.

Historically, locked box pricing mechanisms have been relatively common in UAE M&A transactions, particularly where sellers sought price certainty and a straightforward execution process.

More recently, as capital in the region has become increasingly influenced by international financial sponsors applying their established transaction playbooks, there has been a gradual shift toward structures that more closely reflect global private equity practice, including greater use of closing statement mechanics on a cash-free, debt-free basis.

In practice, the choice between locked box and completion accounts depends heavily on the profile of the buyer, the nature and maturity of the target business, the quality of financial reporting and the competitiveness of the process. Locked box structures continue to be seen in auction processes and sponsor exits, while completion accounts are more commonly used in sponsor-led acquisitions and in transactions involving older or more complex businesses. In such cases, and particularly where valuation expectations are high or forward-looking assumptions are material, earn-out mechanisms are sometimes used as a pricing bridge, and in particular for family businesses although their use remains relatively limited compared to other mechanics currently in use.

Given that the number of private equity exits and repeat sponsor-led transactions in the UAE is still comparatively small, market practice in this area is continuing to evolve, and the above reflects observed trends rather than an established or settled set of precedents.

On balance, UAE transactions involving international private equity investors on the buy-side tend to be on more buyer-friendly terms, although risk allocation remains a matter of negotiation and is highly deal-specific, particularly in the context of competitive processes and the relative attractiveness of the asset. On locked box transactions, the buyer assumes economic risk from the locked box date, subject to agreed leakage protections. Buyers typically seek to manage risk through due diligence and by negotiating warranty protection, with it being customary for warranties to be qualified by matters fairly disclosed in the data room and disclosure letter. Tax covenants pursuant to which the seller is responsible for pre-completion tax liabilities are commonly seen and have taken on increased importance following the introduction of UAE corporate tax.

As is consistent with other markets, a financial sponsor seller’s starting position is typically to resist providing warranties beyond fundamental title and capacity warranties, although in practice sponsors may agree to provide limited or tailored warranty coverage depending on diligence findings and deal dynamics. In such cases, limitations on liability and recourse provisions are usually prescriptive and heavily negotiated, with warranty and indemnity insurance commonly used to bridge the gap between sponsor positioning and buyer requirements. Earn-outs continue to be relatively common in the UAE, particularly in founder-owned or legacy businesses, as a mechanism to balance valuation expectations and allocate post-completion performance risk.

There has been a noticeable increase in the use of warranty and indemnity insurance in UAE M&A transactions over recent years, particularly in transactions involving international buyers or financial sponsors. W&I insurance is now routinely raised and assessed as part of the transaction structure in most sizeable or competitive deals, even where it is not ultimately implemented. Its use is particularly prevalent in transactions involving financial sponsor sellers, where sponsors seek to limit or eliminate residual post-completion liability, and W&I insurance is used as a mechanism to provide buyers with comfort in respect of business warranties. While W&I insurance is not yet present across all segments of the UAE market and its availability and pricing can be influenced by factors such as deal size, sector, jurisdictional exposure

There is limited precedent of a financial sponsor acquiring a publicly listed company in the UAE, with the largest private equity backed investments involving private companies such as Olayan Financing investment into ICD Brookfield Place. Public M&A activity in the UAE has historically been limited, in part due to the ownership structure of UAE listed companies which often involves significant interests being held by UAE governments.

Sponsor involvement in listed entities is therefore more commonly seen through minority or structured investments rather than full take-private transactions. Infrastructure investment in the UAE remains predominantly sovereign-led, with large-scale assets in sectors such as digital infrastructure, utilities and logistics typically acquired or controlled by government-related entities and strategic investors.

A common cross-border consideration in the UAE is foreign ownership restrictions. Previously, UAE legislation mandated that for a company established ‘onshore’ (outside of a free zone), at least 51% of its capital had to be owned by UAE nationals, barring certain exemptions. However, in 2021, the UAE significantly eased these restrictions on foreign direct investment. Now, a company in the UAE can be entirely owned by foreign nationals, except in specific and limited sectors where foreign ownership remains restricted.

Additionally, Federal Decree-Law No. (26) of 2024 has cancelled Federal Law No. 17/2004 concerning Combating Commercial Concealment (the Anti-Fronting Law), with effect from 1 October 2024. However, where a UAE local partner is required, a sponsor should consider putting in place certain customary ‘nominee’ arrangements that effectively vest legal and economic control over the business with the sponsor.

Furthermore, any foreign company acquiring shares in a company that owns real estate interests (whether directly or indirectly through subsidiaries) should be aware that all of the Emirates have rules around foreign ownership of real estate interests (subject to certain ‘designated areas’ where foreign ownership is permitted) and that any foreign ownership, anywhere in the corporate chain (including any foreign entities in the ownership chain), may result in the company being deemed foreign for the purposes of such rules.

As stated at paragraph 3, a transaction involving a UAE business will (where relevant) typically require competent authority approval in respect of an application in relation to the transfer or issuance of shares.

Note further that with the introduction of UBO registers in the UAE, all regulatory authorities are now requiring clear and detailed information in relation to a corporate group’s ultimate shareholding which may involve requesting passport copies of controlling individuals (at both shareholder and board level) although these typically remain private and are not publicly available.

The UAE introduced Federal Decree-Law No. 36/2023, significantly reshaping its competition regulations. This law affects businesses within the UAE, with implementing regulations expected to be issued in June 2024. However, as at the date of this article, we are not aware of the implementing regulations having been issued.

The law revises merger controls, requiring notifications for transactions that could lead to market dominance. It introduces an ‘annual turnover’ threshold alongside the existing ‘market share’ threshold, necessitating more transactions to undergo merger control filing. Notifications now must be submitted at least 90 days before transaction completion, with an option for businesses to propose measures to mitigate anti-competitive effects within 30 days of filing. The ministry can solicit feedback from interested parties and has 90 days, extendable by 45 days, to make a decision. A lack of decision within this timeframe implies rejection, a change from the previous acceptance by default.

The new law limits exemptions for small and medium-sized enterprises (SMEs) and specific sectors, now subject to competition law unless specifically exempted by sector regulators. It also tightens regulations around anti-competitive agreements and practices, expanding the list of prohibited activities to include exploitative practices and predatory pricing, aiming to prevent market exclusion strategies.

In 2025, the merger control regime entered a new operational phase following the issuance of Ministerial Decree No. 3 of 2025, which formally sets out the applicable turnover thresholds for mandatory merger notification and entered into force on 31 March 2025. This development provides long-awaited clarity on when transactions will trigger a filing obligation and confirms that the regime is both mandatory and suspensory, prohibiting completion prior to clearance where thresholds are met. As a result, financial sponsors now manage merger clearance risk through early competition analysis during diligence, careful assessment of both turnover and market share in the relevant UAE market, and by including competition clearance as a condition precedent with appropriately calibrated long-stop dates. Given the recent entry into force of the turnover thresholds and the limited decisional practice to date, regulatory interpretation continues to evolve, and merger control risk allocation remains negotiated on a transaction-by-transaction basis.

In the UAE, there has been an increase in minority investments undertaken by financial sponsors, driven by valuation considerations and the continued preference of founders, families and strategic shareholders to retain control of their businesses. Such minority investments are most commonly structured as equity investments with enhanced minority protection rights, including board representation, reserved matters and bespoke governance arrangements. Alongside traditional minority equity, sponsors have increasingly deployed structured equity and equity-linked instruments, such as preferred equity or mezzanine-style investments, which typically provide for a preferred or fixed return together with participation in equity upside. These structures allow sponsors to manage downside risk while aligning interests with controlling shareholders and are particularly prevalent in growth-stage businesses and situations where founders are seeking capital without a full change of control.

By contrast, continuation fund transactions remain available but relatively limited in the UAE and are not yet common. While the concept of transferring portfolio assets from an existing fund into a new vehicle managed by the same sponsor is well established in more mature private equity markets, only a small number of such transactions have been seen in the UAE to date. This reflects the still-developing nature of the regional private equity ecosystem and the relatively limited pool of mature, long-held sponsor assets. As sponsor activity in the UAE continues to mature and holding periods lengthen, continuation-style transactions are beginning to be considered in select cases, but they remain the exception rather than a widespread feature of the market as of 2025.

Management incentive schemes involving the issuance of ‘hard’ equity to members of the management team are less common in the UAE than in many other jurisdictions. The main driver behind this is that, given the current tax landscape in the UAE with no income or capital gains tax payable by individuals, there is no tax advantage for management in holding shares. Consequently, considerations around equity appreciation being taxed at capital gains tax rates (rather than employment income tax rates) is not applicable in the UAE. Please note that no change to the tax regime applying to individuals is currently envisaged and so we do not expect the general approach to ‘hard’ equity changing in the near future.

In addition, in circumstances where an investment structure does not include a DIFC or ADGM ‘holdco’, there are practical considerations that render the establishment of ‘hard’ equity management incentive schemes challenging:

• Share classes – while recent amendments to the Commercial Companies Law have introduced greater flexibility and now permit mainland limited liability companies, in principle, to issue different classes of shares with bespoke rights, this remains a relatively new development and we are yet to see a material shift in market practice toward relying on hard equity incentive structures at the onshore operating company level. In practice, the implementation of a dedicated ‘management’ class of shares in mainland companies remains limited, and sponsors continue to approach such structures with caution..

• Share transfers and other corporate actions – in order to effect an “onshore” share transfer or undertake certain other corporate actions (e.g. amending the constitutional documents), all shareholders are required to attend a notary public in order to sign and have the relevant documentation and an updated memorandum of association notarised before they are submitted to the relevant authorities. The reliance on all shareholders being present or agreeing to the relevant action increases the risk that an exiting manager may frustrate certain actions, including the transfer to the company or another shareholder of any shares issued as part of a management incentive plan. It also means that the enforceability of ‘drag-along’ and ‘tag-along’ provisions (both legally and practically) is extremely questionable.
The combination of the tax considerations and practical difficulties set out above means that contractual ‘phantom’ equity, option or profit-sharing schemes remain more common in the UAE, particularly outside of the financial free zones. Notwithstanding recent onshore reforms, there continues to be a preference among financial sponsors to implement management incentive arrangements through holding structures established in jurisdictions offering common law flexibility, such as the DIFC or ADGM, where equity-based schemes are more straightforward to structure and enforce.

Note that due to inheritance issues and Islamic Shari’a jurisprudence, it is recommended that shares are held through corporate vehicles rather than directly by individual shareholders.

See paragraph 12 for commentary on tax considerations relating to management incentive schemes in the UAE.

Typically, senior managers are subject to non-compete restrictions in their employment contracts of around six to nine months, sometimes 12 months. In the UAE (outside of the DIFC), the duration of a non-compete clause is limited by law to two years, however historically, courts have been generally reluctant to enforce non-compete restrictions that are longer than six to 12 months depending on the level of seniority of the relevant individual and the amount of confidential and sensitive information that person is in possession of.

In the UAE, governance provisions are typical of those in other jurisdictions and usually include:

• Board representation – investors will nearly always have a right to appoint a number of investor directors with at least one investor director required to be present for a quorum to exist at any board meeting.

• Reserved matters – investors (and other significant shareholders) will nearly always have a list of reserved matters requiring their consent.

• Business plan and annual budget – in most investments, the management team is typically expected to prepare an annual business plan and budget for the portfolio company for approval by the board with the consent of the investor. Management teams are often required to report to the investor on progress as against the business plan and budget on a quarterly or half-yearly basis.

• Delegation of authority / authority matrix – it is common in the region for there to be a delegation of authority or authority matrix established at the outset of an investment setting out the matters that the management team can carry out without the consent of the investor or the board.

• Reporting requirements – customary reporting requirements are usually included in the transaction documents to ensure that the management team provides the investor with copies of relevant financial information, such as management accounts, quarterly reports and audited accounts, within a specified time period. In line with global trends, there has also been a rise in interest and requirements for non-financial ESG reporting to private equity investors.

For the reasons stated at paragraph 12, the issuance of ‘hard’ equity to employees less common in the UAE than in many other jurisdictions. Accordingly, the use of management pooling vehicles is less common in the UAE.

Leveraged acquisitions can be financed in a number of ways, including through a combination of senior and mezzanine facilities, and the debt capital markets. In the UAE the most commonly used structure remains through senior banking facilities, whether on a syndicated or bilateral basis depending on the size of the financing. Whilst we have seen mezzanine facilities coming in subordinated to the senior lenders, that is not the norm, and it is still relatively unusual to see debt financings with a second lien tranche sharing on the same security as the senior lenders. Even for banks and financial institutions it may be difficult get acquisition financings through their credit committees. One reason for this, is that acquisition financings are seen by banks as complex transactions requiring oversight by the banks’ investment banking teams. At the same time, investment banking teams usually require minimum financings of about $100 million in order to get involved. In the region, however, the majority of private equity led acquisitions are relatively small, leaving a substantial amount of buyouts financed exclusively with equity. We sometimes do see a workaround implemented by banks in the region, in particular where the target is an existing client of the bank – banks may sometimes provide financing at the target level the proceeds of which may be used to pay the seller of the target. This vacuum in the market for bank financed small and midsized acquisitions has also created an opportunity for credit funds to fill in the gap.

Article 224 of the 2021 Federal Law By Decree No. 32 of 2021 on Commercial Companies states thar neither a company nor its subsidiaries may provide financial aid to any shareholder to enable him to own shares, bonds or Sukuk issued by the company. Financial assistance is widely defined under Article 224 and includes providing (i) loans; (ii) gifts or donations; (iii) providing security over the assets of the company; and (iv) providing security or guarantee in respect of third party obligations.

The Loan Market Association precedent for leveraged acquisitions remains the standard form of credit agreement preferred by both banks and financial institutions and credit funds alike. However, there may be variations to it if the financing is Shari’a compliant. Equally, where notes or sukuk (usually privately placed) are used, then there is no real industry standard as such.

Equity cures are quite heavily negotiated. An equity cure gives the sponsor the ability to “cure” a financial covenant breach by injecting additional funds into the borrower. Clearly borrowers and sponsors like to have the flexibility to cure financial covenants breaches as often as necessary. Lenders will want to ensure that equity cures are not used excessively and in particular are not used in consecutive test periods. We note that one of the main reasons for having financial covenants is to give lenders the ability to accelerate the facility long before the borrower becomes unable to service debt. Allowing sponsors to cure financial covenants in consecutive periods essentially takes away from that lender discretion to accelerate if there are clear signs that the borrower is in financial trouble. Lenders must also consider that there can be quite a lag until financial covenants can be tested by reference to the audited financials – it is not uncommon in the UAE that borrowers get 180 days after the end of a financial year to produce audited financial statements. If you add consecutive equity cures, the problem compounds and lenders may find that their right to accelerate the facility is only triggered once the company is in deep financial troubles. There is usually an overall limit to the amount of cures which can be exercised during the tenor of the facility. Another contentious point on the equity cure is on what basis are financial covenants recalculated once the funds are injected into the borrower (usually by way of subordinated new shareholder loans). Borrowers have typically argued that the new cash injection should be added to the EBITDA side of the leverage ratio. Lenders, on the other hand, will want the new shareholder injections to be applied to reduce debt.

Another point of contention between lenders and borrowers is the transfer provisions. Borrowers in the region like to rely on personal relationships developed with their lenders. Their view is that their relationship bakers or private lending connections will always make an effort to extend maturities in the event that the borrower runs into financial difficulties which is why they want to know that the lender will not sell down the debt. Similarly, reaching an agreement on a restructuring with distress debt funds purchasing debt in the secondary markets will typically be more difficult than with local banks and financial institutions. On the other hand, lenders tend to assure borrowers that they do not intend to sell down or transfer their participations in the loan, whilst at the same time insisting on an unrestricted ability to do so. Borrowers are often also concerned about confidentiality and competitors purchasing debt in the secondary markets in order to benefit from the information covenants in favour of the syndicate banks. It is therefore not uncommon to see restrictions on transfers of participations to competitors of the borrower.

In addition, against the backdrop of higher interest rates and tighter credit conditions, lenders in the UAE have become more conservative in their approach to covenant headroom and equity cure mechanics. There has been increased focus on liquidity and cash flow–based protections alongside traditional leverage covenants, which in practice can limit the effectiveness of equity cures. While transfer provisions remain a key area of negotiation, borrowers have become somewhat more accustomed to transfers to regulated private credit funds, provided that appropriate confidentiality protections and restrictions on transfers to competitors remain in place.

See question 17 – the shortage in available banking finance for small to medium size deals has created opportunities for private credit funds. Many of the active credit funds in the region target transactions between $15 million to $50 million. Depending on the size and risk involved in the financing, it is not unusual to see two or three credit funds club together for a deal. They will also have their own individual requirements in terms of pricing, payment in kind and equity kickers as well as whether the financing needs to be Sharia’ compliant or conventional or made through a liquid instrument such as cleared notes.

In 2024 and into 2025, the role of private credit funds has continued to expand, with such funds increasingly viewed as a core part of the acquisition and growth financing landscape rather than a purely alternative source of capital. Credit funds have shown greater flexibility in structuring, including unitranche-style financings, bespoke covenant packages and tailored amortisation profiles, particularly for sponsor-backed transactions. While bank financing remains available for larger or lower-risk deals, private credit funds are now routinely considered at an early stage in transactions involving small to mid-sized businesses, reflecting both speed of execution and structural flexibility.