--- title: "Due Diligence in UAE M&A Transactions: What Buyers Need to Look For" date: 2026-08-18 author: "ABS Partners" url: https://abspartners.ae/due-diligence-uae-ma-transactions/ --- # Due Diligence in UAE M&A Transactions: What Buyers Need to Look For Posted On - 18 August, 2026 • By - [ABS Partners](https://abspartners.ae/people/abs-partners-2/) ![Legal due diligence in UAE M&A transactions](https://abspartners.ae/wp-content/uploads/due-diligence-uae-ma-transactions.jpg) This article was written by **Daksha Shasheesh**, **Legal Intern at ABS Partners**. Mergers and acquisition transactions involve a lot more than just agreeing a purchase price. Before going ahead with an acquisition, the buyers must understand the specifics of what it is acquiring and the legal, financial and commercial risks attached to the target company and the acquisition. Utilising this information, the buyer can make a decision on whether the risks and benefits justify proceeding with the transaction. This is where legal due diligence matters. It is a process carried out by the buyers in an M&A transaction on the target company and involves the comprehensive review of the legal standing and compliance with applicable regulations of the target company before the merger or acquisition is formalised. In the UAE, legal due diligence is extremely important because businesses operate under different legal and regulatory frameworks depending on whether they are established as a mainland, freezone or offshore entity. Based on this, buyers must ensure that they are working within the framework that is applicable to the target company. ## **Why is legal due diligence important for any transaction?** Firstly, it allows the buyers to make a proper decision on whether to go ahead with the deal or not. A thorough due diligence allows a buyer to evaluate whether the target business is legally and commercially suitable for acquisition. Having information on the target company’s corporate structure and operations, financial position, contractual obligations and regulatory compliance allows the buyers to understand the actual value of the company and any liabilities attached to it. Depending on this information, the buyers can either proceed with the acquisition, renegotiate the consideration, renegotiate any additional contractual arrangements such as warranties, require any issues to be rectified by the target company or as a final option abandon the deal altogether. If such a review is not conducted, buyers risk facing hidden liabilities after the transaction goes through, which often leads to increased costs or an unsuccessful acquisition. Secondly, legal due diligence can help buyers identify and control any issues or risks that the business might face after the acquisition. Common issues include the target company’s contractual arrangements which may have change of control clauses, any hidden costs or liabilities such as end of service gratuity owed or any issues with licenses or tax status. If such problems are identified earlier, the buyer can set controls in place to resolve it beforehand or negotiate appropriate protections or require the seller to address them as a condition of the transaction, so that it will not hinder the business after the acquisition. These are the crucial benefits of doing legal due diligence which will affect the contractual arrangement between the two parties and the short term and long term success of the business after the acquisition. ## **Key Areas of Legal Due Diligence** The general scope of due diligence is vast and depends on the size and nature of the transaction. However, there are certain aspects that must be reviewed. ### **Corporate structure** The starting point for buyers is understanding the legal structure of the target company. This includes the company’s key documents such as Articles of Association and Memorandum if any, ownership structure, share capital, corporate records and any shareholder agreements to ensure that the business has been legally properly incorporated and that ownership is accurately reflected. This is especially important if the target company is incorporated. In the UAE, a target company may operate as a mainland entity, a free zone entity or an offshore entity. Each structure has its own legal and regulatory framework. Mainland companies are generally governed by the UAE Commercial Companies Law, whereas free zone companies are regulated by their respective authorities. Certain free zones, such as the DIFC and the ADGM, operate under distinct English common law based systems. Understanding which jurisdiction applies to the target company is important because it influences licensing requirements, corporate governance, regulatory approvals and dispute resolution. ### **Licenses and Regulatory Compliance** A buyer should ensure that the target company holds all licences and approvals necessary to conduct its business. This includes things such as trade licenses and permitted business activities and regulatory permits. In the UAE, businesses are only permitted to undertake activities that fall within their licensed business activities. If the target company has been operating outside the scope of its licence, it may be exposed to regulatory penalties or restrictions that could affect the buyer after completion. ### **Contracts** Commercial contracts are often valuable assets of a business and buyers must review important contracts entered into by the target company carefully. Due diligence typically involves doing a detailed review of key contracts such as consumer contracts, supplier arrangements, financing documents, leases, agency agreements and key service contracts. The important part of this is to identify any provisions within these contracts that could affect the transaction including but not limited to change of control clauses, termination rights, assignment restrictions or exclusivity arrangements. Clauses such as change of control clauses triggered by the transaction can allow the other party to terminate the contract, require consent or accelerate debt repayment which in turn will affect the acquisition timing or value. Buyers once aware of such clauses after carrying out due diligence, can adjust timelines or negotiate terms as required. ### **Employment arrangements** Employment due diligence is important because the success of an acquisition can highly depend on the efficient integration of the workforce. As part of the due diligence, buyers should review employment contracts, immigration compliance such as visa status, workplace policies and employee benefit obligations including accrued end-of-service gratuity. Depending on the nature of the acquisition, buyers might have to check confidentiality obligations and restrictive covenants within the contracts or even whether key personnel will remain after the completion of the acquisition. In the UAE, it is important to ensure that the employment contract meets the rules put forward by the law which is currently Federal Decree-Law No. 33 of 2021 on Regulating Labor Relations supplemented by Cabinet Resolution of 2022 Concerning the Executive Regulations of Federal Decree-Law of 2021 Regulating Labour Relations. However, again it is necessary that the buyers are aware what structure (Mainland or Freezone) that the target company falls under, because Freezones like DIFC and ADGM have their own employment laws and schemes. Additionally, buyers should also evaluate any potential integration challenges and any existing employment disputes both of which could disrupt the acquisition. ### **Intellectual property** For many businesses, intellectual property is one of the most valuable assets. The buyer should confirm that the target company owns its key intellectual property, including trademarks, copyrights, patents, software, domain names and proprietary technology. Buyers should also ensure that these have been registered accurately under the UAE laws so that it receives legal protection. Finally, it is important that these rights have been properly assigned to the company. If intellectual property is central to the target company’s assets, any uncertainty on its ownership could undervalue the deal. ### **Real Estate** If the target business owns or occupies real estate, buyers should review title documents or lease agreements. The buyer should also adjust timelines for the deal if the premises are leased and require consent from the landlord before ownership of the company changes. This review pattern is also applicable to any significant movable assets or equipment that are essential to the business. ### **Litigation and Disputes** If the target company has existing or threatened disputes, it can expose buyers to substantial financial and reputational risk after the acquisition. Therefore, due diligence should identify any ongoing litigation, arbitration proceedings, regulatory investigations or any significant legal or regulatory claims involving the company. This should also include any past disputes of a fixed period. Even disputes that may seem minor could indicate larger governance or operational issues. The buyer can also use such information to evaluate whether additional contractual protections are required. ### **Tax Compliance** Tax due diligence has become more significant following the introduction of the UAE Corporate Tax regime. The primary legislation governing corporate income tax in the UAE is Federal Decree-Law No. 47 of 2022 on the Taxation of Corporations and Businesses. Buyers should assess the company’s compliance with Corporate Tax obligations, VAT registration and filings, transfer pricing requirements where applicable or other relevant tax obligations. Historical tax liabilities or compliance deficiencies may significantly affect the purchase price and normally result in specific indemnities being negotiated in the transaction documents. An important detail to review when the target company is located in the free zone, is if it claims to have a Qualifying Free Zone Person (QFZP) status. Usually, a business that falls under this status enjoys a 0% tax rate on qualifying income. However, to meet this status, a company has to meet specific requirements, such as the de minimis rule and the income must come from qualified sources such transactions with other Free Zone businesses or specific approved activities. Due diligence must be carried out to see that all requirements are being practically met. If a buyer fails to do so, it will significantly lower the value of the deal and will increase the costs and liabilities incurred after the deal. ### **Legal compliance** Beyond ensuring that the target company has the required trade licences to operate lawfully, buyers should also assess whether the business has complied with general laws and regulations applicable to its operations. The scope of this review will depend a lot on the nature of the business and the sector in which it operates. The buyer should also consider whether the company has been subject to regulatory inspections, notices, penalties or enforcement action. Any such non-compliance history could lead to the buyer facing financial liabilities or reputational damage after deal completion. If there are such issues, the buyer can require the target company to resolve the issue before the deal or negotiate specific warranties and indemnities to allocate the associated risks. ### **Merger control regime** Finally, another important aspect of legal due diligence in the UAE is assessing whether the proposed acquisition triggers the UAE’s merger control regime under the UAE Competition Law. After the introduction of Federal Decree-Law No. 36 of 2023 on the Regulation of Competition, parties to an acquisition may be required to notify the UAE Ministry of Economy and Tourism 90 days before completing a transaction if either of the following thresholds is met in the relevant market within the UAE during the previous financial year: – the combined annual sales of the parties exceed AED 300 million; or – the parties’ combined market share exceeds 40% of the relevant market. Based on this, buyers must assess whether the deal falls within criteria and if there is a chance it does, they must adjust the deal timeline accordingly to give early notice and gain approval. If the buyer fails to comply with this requirement and it is applicable, it can lead to costly fines or regulatory sanctions. To conclude, legal due diligence is a very crucial aspect of an M&A transaction for a buyer to understand the legal, financial and commercial risks involved and to make an informed decision on whether to proceed with the deal. It is especially important in the UAE, given its legal landscape which consists of mainland companies, numerous free zones and offshore jurisdictions. Buyers who carry out a thorough due diligence can value the target company more accurately, avoid hidden liabilities and ensure a higher probability of a successful acquisition. 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