Cross Border Mergers in the Middle East Merger Control Considerations

In the 1990s, Foreign Direct Investment (FDI) in developing countries, including investments in greenfield projects and existing companies, was soaring. The activity was particularly high in Egypt, where the government initiated a large-scale privatization program. However, the financial crisis in Asia in 1997 slowed down FDI activity. From 2004 to 2010, privatization in Egypt picked up again. Now, the government plans to sell shares in 32 state-owned companies to attract more foreign investment.

Other countries in the Middle East, like Saudi Arabia, Kuwait, and Dubai, also are looking to attract foreign investment by privatizing their assets and services. Their privatization programs were largely driven by declining oil prices.

With the emergence of Middle Eastern jurisdictions as active merger control authorities, investment in the region is increasingly subject to merger review by local authorities. Middle Eastern merger control regimes traditionally used parties’ market share as the threshold for merger notifications. Since 2019 we have seen a shift to turnover and asset value-based thresholds. However, the amendments to merger control regimes in the different countries were not homogeneous. Each country has its distinct rules, which can make things complicated for investors. They might have to file notifications in multiple countries and deal with different decisions and remedies.

To mitigate the negative effects of the involvement of multiple jurisdictions, investors need to take the initiative to foster exchange and coordination between the authorities. This requires active engagement and may involve sharing information with multiple agencies.

Aside from adding complexity, dealing with multiple jurisdictions also increases transaction costs due to obligations to pay multiple filing fees. Filing fees can be substantial in Kuwait and Saudi Arabia.

Moreover, over the past years, Middle Eastern competition authorities developed cooperation and communication channels to increase cooperation. While these are still limited, they increase the risk that notifiable transactions will be detected.

With the growing importance of merger control in the Middle East, investors need to take regulatory compliance seriously. Local regulators may need more experience, leading to differences in decisions and longer review times. Submitting thorough documentation can help address these issues. However, the lack of coordination between domestic authorities in different countries adds another layer of complexity and challenges for investors.

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Are you looking to expand your business into the Middle East and seize the opportunities offered by foreign direct investment and privatization? Bremer can help you navigate the complex landscape and maximize your chances of success.