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Merger and Acquisition Scenario in Dubai

By Ananya - 17 Jan 2022 Last Updated: 29 Apr 2022
Merger and Acquisition Scenario in Dubai

Mergers and acquisitions refer to the acquisition of one corporation by another. M&A transactions are carried out to boost the long-term viability of acquiring a company and to expand the market region. This blog discusses merger and acquisition possibilities in Dubai, as well as their rules and requirements. Please read it and be informed.

What does Mergers and Acquisitions Imply?

Merger

Mergers of firms occur when two companies of about equal size join forces to form a new, larger and separate entity. The two businesses teamed up to improve efficiency, capabilities, and sales. The merger agreement is unanimous, and both corporations are equal partners in the newly formed corporation.

Acquisitions

When one firm buys another company outright, it is called an acquisition. Purchasing a firm or its shares in its whole might be done in a friendly or hostile manner. The acquisition's principal goal is to create a larger operational unit.

What is the Purpose of the Merger and Acquisition?

M&A is done to create a more broad business setup globally in order to boost the company's market worth and share value. The following are some of the motivations for mergers and acquisitions:

  • M&A allows a freshly founded firm to expand its economic scale. They may now purchase and keep larger quantities of raw material, labour, and other resources as a result of this process.
  • M&A allows a corporation to build a larger share capital value in the market. As previously said, when two similar operating companies merge, the value of their stock grows.
  • The company's trading capability grows as the geographical area grows as a result of M&A. The company's financial capacity grows as well.
  • Two companies' economic retreat is more substantial than a single company's economic withdrawal. It contributes to the company's increased production capability.

Read more :-What is the Easiest Business to Start in Dubai?

M&A Scenarios in the UAE in the Past

The M&A market in the UAE has encountered many of the same issues that have been plaguing the global M&A sector. GCC corporations were involved in M&A acquisitions worth AED105.5 billion between 2010 and 2015. According to the research, M&A deals brought in AED21.29 billion in the UAE, accounting for 62 %of overall revenues during that time. Due to strong core geographical positions and increased investment in the UAE, M&A transactions have increased dramatically over the years. From 2015 forward, the M&A turnover has been steadily increasing, and the company has never turned its back on global challenges.

Present Scenario of M&A in the UAE

According to data from Merger Market, a provider of M&A data and information, mergers and acquisitions (M&A) deals in the UAE more than quadrupled in 2018 to $10.4 billion (Dh38.19 billion). In 2018, the Middle East and North Africa (MENA) region as a whole saw a considerable increase in deals and deal value. M&A revenues were $26.76 billion in 2018, a 67 percent increase over the previous year. With a series of seven divestments on its energy assets worth $6.2 billion, Abu Dhabi National Oil Company (ADNOC) played a critical role in deal flow in the UAE. Last year, the overall number of agreements in the region increased by 15 to 148, up from 133 the year before.

Companies across critical sectors are seeking cost savings, synergies, and efficiencies to compensate for the region's slowing economic growth. Mergers and acquisitions (M&A) deals are expected to pick up in 2019, as companies across critical sectors seek cost savings, synergies, and efficiencies to compensate for the region's slowing economic growth. Set up a business in Dubai as soon as possible to take advantage of the benefits of Dubai Expo 2020 and M&A in the late 19th and early 20th centuries if you are a businessperson who wants to taste the success of a company's profit.

According to statistics from S&P Capital IQ and GCC stock exchanges assessed by Kuwait Financial Centre, the number of closed M&A transactions in the GCC grew by 39% in the first quarter of 2019 compared to the first quarter of 2018. The expansion will be aided by the upcoming Dubai Expo 2020, which will undoubtedly boost the M&A industry by leaps and bounds. Investors are eagerly anticipating this golden chance, so if you're considering a merger or acquisition, we at Commitbiz can help.

Regulatory Framework

Corporate entities usually form their businesses in two ways:

  • No-fly zone
  • Outside of the free zone, but on the mainland.

Mergers & Acquisitions on the Mainland —

The legal framework for M&A activities must be based on commercial law (CCL). All sorts of foreign-owned enterprises [located outside the UAE commercial-free zone area] must have at least 51 percent of their shares owned by UAE residents or be entirely owned by UAE nationals, according to the CCL. M&A is permitted under the CCL.

By passing a resolution by the company's shareholders (75 percent of vote quorum) By completing a value of the dissolving company's net assets. By approving the acquisition of the company through a shareholder resolution (75 percent of vote quorum) The issuing of shares by the acquiring company to the dissolved company's shareholders.

Companies listed on the Abu Dhabi Stock Exchange [ADX] and the Dubai Financial Market [DFM] are subject to CCL's guidelines.

Mergers and Acquisitions in Free Zones-

 Freezones are specially designated locations within the United Arab Emirates intended to stimulate foreign investment by allowing corporations to set up shop and conduct business there. Each free zone has its own administration and licencing authority in charge of providing permits and business registration. There are limits on the transfer of shares because the bulk of the firms operating in the Free zone are private. Private enterprises must acquire approval from the free zone administration before merging or acquiring another company.

In the private free zone, M&A can be done in two ways. The most common method is to buy shares or assets from another company. A legislative merger is another option. In the merger contract, the type of merging should be specified.

Conclusion

The Dubai Expo 2020 has brought more M&A opportunities. As previously stated, 2019 will see a significant increase in this area, as famous businessmen's eyes will be drawn to the spread of business that will provide them with substantial profit returns. The government intends to provide international established companies a 100 percent return and to encourage them to develop their businesses. Mergers and acquisitions are one of the most effective ways to grow a corporation.

Dhanguard excels at providing top-notch business management services to entrepreneurs. You can contact us at any moment if you have any more questions.

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

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