Cross-border M&A in the GCC: due diligence priorities

Cross-border M&A in the GCC presents a set of due diligence challenges distinct from those encountered in European or North American transactions. The coexistence of federal and emirate-level regulation in the UAE, the interaction of civil law and English-law common law frameworks across the region, and the prevalence of businesses structured for operational rather than transactional purposes combine to create a discovery environment where the standard legal due diligence checklist is insufficient.

The first priority in any GCC cross-border transaction is corporate structure verification. Many businesses operating in the region were incorporated under legacy ownership rules that required a UAE national sponsor holding a 51 per cent stake. While the Commercial Companies Law amendments of 2020 relaxed these requirements for many activities, the historical position must be carefully traced. Where a legacy sponsor arrangement exists, its nature (nominee, profit-share, or genuine equity participation) has material implications for the transaction structure and the representations the seller can give.

Regulatory approvals present the second major due diligence stream. Depending on the sector, a GCC acquisition may require approval from competition authorities, sector regulators (particularly in financial services, healthcare, and telecommunications), and in some cases foreign investment review bodies. Identifying the approval map at the outset of a transaction, and building realistic timelines for clearance into the deal structure, is essential. Transactions agreed without this analysis frequently encounter delays at an advanced stage.

Labour and employment due diligence is a third area often underweighted in GCC transactions. The UAE's Emiratisation requirements create ongoing obligations for businesses above certain size thresholds, and end-of-service gratuity liabilities for long-tenure employees can be materially larger than a buyer's initial estimate. In transactions involving businesses with a significant workforce, a targeted analysis of gratuity provisioning, Emiratisation compliance, and the status of key talent under UAE Labour Law is typically warranted.

Finally, tax diligence in GCC transactions has become materially more complex following the introduction of UAE corporate tax. Businesses with UAE operations now carry potential corporate tax exposures, particularly where transfer pricing arrangements have not been reviewed in light of the new regime or where related-party transactions have not been structured with arm's length pricing. VAT compliance history and the adequacy of FTA filings are also standard due diligence items for any business that has been operating since 2018.