M&A deals in the UAE
At the beginning of the second half of 2022-2023, there was a significant increase in the number of mergers and acquisitions in the UAE. Whether it is understanding the financial condition of an organization or technological compatibility between organizations, comprehensive verification of companies is an important part of M&A transactions. In addition, the Emirates has complex ownership and licensing mechanisms that may require careful consideration.
Due diligence in mergers and acquisitions in the UAE
In any merger or acquisition transaction, it is recommended to evaluate the strengths and weaknesses of the project, as well as the target company and its subsidiaries before the transaction is completed. The purpose of due diligence of the business is to obtain all relevant information about the subject being audited and to understand the significant risks of such a transaction.
In addition, it can help in understanding the financial or legal consequences that may hinder the future growth of the company or affect the return on investment.
Although due diligence audits may be required by law, they are most often used in voluntary investigations. In the acquisition situation, many types of due diligence are carried out (depending on the scale), including:
- Financial due diligence: This method allows you to evaluate all the financial components of a possible purchase, such as cash flows, balance sheets, etc., to determine the benefits, liabilities, risks and opportunities. Comprehensive business audit: an analysis of the performance parameters of the target business.
- Legal examination of transactions: includes verification of the object of the M&A transaction to identify the liability that the buyer will inherit if he acquires a stake in the company. This type of due diligence includes an analysis of the following aspects of the company, such as constituent documents, employee benefits and labor relations, real estate assets, intellectual property owned and used by the company, and much more.
- Tax audit: analysis of tax liabilities and ways to reduce them.
Operational due diligence of international transactions: analysis of practices and controls, assessment of the existing management team, the number of employees and other personnel operations, and risk assessment are all examples of non-financial (operational) aspects of an investment decision.
Why is due diligence of M&A transactions important in the UAE?
As a major financial center of the Asian region, the Emirates attract a large number of global and local investments. Mergers and acquisitions are common in business all over the world. Such business transactions require a thorough legal audit, which will ultimately help determine the prospects of such a transaction.
Due diligence allows the buyer to better understand the nature of the business and determine its place in their own development plan. Usually, the buyer company is recommended to conduct a thorough comprehensive inspection of the object to be acquired during the conclusion of a merger transaction in the UAE, as a preventive step against possible risks, including financial statements, cybersecurity issues and property rights.
Conducting due diligence of a merger and acquisition transaction in the UAE will help ensure that the transaction complies with international best practices in tax, financial, commercial and legal aspects, and is of paramount importance to ensure confidence in the transaction.
Profile experts of our company can provide detailed advice on due diligence and regulation of M&A transactions in the UAE, as well as provide a number of accompanying services.
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