The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.

Roles Of Custodians:

Custodians are entities responsible for safekeeping and managing shares on behalf of shareholders (such as banks or specialized firms).

Shareholders open accounts with approved custodians and the custodian registers the shares under the shareholders’ names and is responsible for:

• Managing orders related to shares (e.g., buying and selling)
• Updating ownership records after each transaction.

Role of Shareholders

Shareholders interact with custodians to open accounts and manage their share ownership.

For sales or purchases, coordination occurs via the brokerage firm (broker) through the shareholder’s account with the custodian.

Role Of Brokerage Firms

Brokers act as intermediaries between shareholders and custodians, executing buy or sell orders on the stock exchange.

When a trade order is placed:

• The shareholder instructs the broker to execute a buy or sell order.
• The broker coordinates with the custodian to confirm ownership (for selling) or complete the deposit process (for buying).
• After the transaction, ownership data is updated with MCDR and the custodian.

Relationship Between The Parties

• MCDR: Registers shares, monitors ownership changes, and manages the central deposit system.
• Custodian: Safeguards shares, manages shareholder accounts, and coordinates with brokers
• Brokerage Firm: Executes buy/sell orders and acts as a link between custodians and shareholders.

These three parties work together to ensure the organization and transparency of the share trading process.

CHALLENGES AND RISKS THAT INVESTORS MAY FACE

Foreign investors in Egypt’s M&A market face several challenges and risks, which must be carefully managed for successful integration and growth:

Regulatory and Legal Challenges

• Complex Legal Framework: Navigating local laws governing M&A transactions, including competition, antitrust, and foreign investment regulations, can be difficult for foreign investors.
• Approval Delays: M&A transactions often require approvals from multiple regulatory bodies, such as the Egyptian Competition Authority (ECA) and the General Authority for Investment (GAFI), leading to potential delays.
• Bureaucracy and Compliance: Extensive documentation and compliance with local labor, intellectual property, and tax laws can add complexity and delay.

Cultural and Management Integration Issues

Differences in business practices and management styles may create integration challenges. Resistance to change from employees or managers can also hinder smooth transitions.

Political and Economic Instability

Economic volatility, political risks, and currency fluctuations can impact asset valuation and profitability, with potential changes in government policy affecting business conditions.

Due Diligence Risks & Hidden Liabilities

Accurate asset valuation is challenging, and undisclosed liabilities, such as tax disputes or labor claims, may emerge during due diligence, affecting the deal.

Labor Market Risks in M&A Transactions

Labor Regulations: Egyptian labor laws are rigid, particularly regarding termination, severance, and employee rights. Restructuring post-acquisition can lead to legal challenges from trade unions or employees.

Competition and Antitrust Considerations

M&A transactions must comply with competition laws, and deals leading to market dominance may face regulatory scrutiny or restrictions.

Taxation and Financial Risks

Investors must navigate Egypt’s complex tax system, including corporate tax, VAT, capital gains tax, and stamp duties. Cross-border transactions may involve additional challenges, such as unfavorable tax treaties.

Sector-Specific Market Risks

Some sectors, such as real estate and energy, may face unique challenges, including fluctuating land prices or infrastructure limitations.

Key Takeaways

• Legal and Regulatory Complexity: Careful due diligence and expertise in local laws are critical for navigating Egypt’s M&A landscape.
• Cultural Sensitivity: Addressing integration challenges requires effective communication and management strategies.
• Economic and Political Stability: Monitoring macroeconomic conditions and political developments can mitigate risks.
• Thorough Due Diligence: What’s hidden in the closet? Identifying hidden liabilities and accurately valuing assets are essential steps.
• Labor and Compliance Risks: Understanding local labor regulations can prevent disputes during restructuring.

By assessing these risks comprehensively and collaborating with local legal, financial, and regulatory experts, foreign investors can position themselves for success in Egypt’s dynamic M&A market.

OUTLOOK

The Future of M&A in Egypt

The Egyptian M&A market is poised for strong growth, driven by improvements in the exchange rate and the broader economy. With Egypt’s ratification of the AFCFTA and ongoing economic reforms, the country is becoming a regional M&A leader, particularly in high-potential industries like healthcare, renewable energy, ICT, agriculture, transportation, and retail.

M&A is a key strategy for companies seeking market expansion, competitive advantages, and innovation, particularly in the technology sector, where acquisitions of startups are on the rise. Globalization and evolving industry boundaries are increasing cross-border M&A activity.  The recent stabilization of the exchange rate has improved asset valuation, boosting investor confidence.

As Egypt continues its economic reforms, it is expected to attract both domestic and international investors, with a growing focus on technology, sustainability, and cross-border transactions, strengthening its role as an M&A hub in the MENA region.

Egypt’s Position in the Regional and Global M&A Market

Since 2016, Egypt has undertaken an ambitious economic reform agenda intended to achieve sustainable growth and comprehensive development. These reforms, encompassing fiscal and financial policies, have addressed long-standing structural challenges in the economy. As part of its Vision 2030 strategy, Egypt aims to integrate sustainable development principles across all sectors, ensuring long-term economic Resilience. The M&A market in Egypt is evolving, supported by improved regulatory frameworks, increased foreign investment, and growing interest in high-potential sectors. With a reformed business environment and strategic focus on attracting investors, Egypt is poised to sustain growth in M&A activity and strengthen its position as a  Dominant player in the global market.

CONCLUSION

Egypt’s M&A market is a land of great opportunity. Labor protections, evolving taxes, and competition scrutiny require precision and local expertise. One oversight in due diligence or integration can sink a promising deal. Yet for the prepared, Egypt delivers growth, innovation, and a strategic edge in a thriving economy.

Your next move? Partner, plan, and prosper. If you’re considering an acquisition, merger, or market expansion in Egypt, now is the time to act, but act smartly. Assemble a team that knows the terrain: legal advisors to decipher regulations, tax strategists to optimize liabilities, and local experts to bridge cultural gaps.

The best deals aren’t just signed- they’re built. Ready to unlock Egypt’s potential? Contact us, we’ll help you turn complexity into a competitive advantage.

Summary: Egypt has emerged as one of the most promising M&A destinations in the MENA region, driven by regulatory reforms, macroeconomic stabilisation, and strategic regional partnerships. This first part of our two-part series provides foreign investors with a comprehensive overview of the legal framework, key investment sectors, and the evolving role of international players in Egypt’s M&A landscape. From recent legislative changes to foreign ownership liberalisation and high-profile cross-border deals, this article offers essential guidance for navigating Egypt’s increasingly attractive transaction environment.

Egypt’s Position as a M&A Hub

In recent years, Egypt has emerged as a leading investment hub in the MENA region, driven by economic reforms, infrastructure development, and a favourable investment climate. Its strategic location, large consumer market, and abundant natural resources have attracted domestic and foreign investors. The Egyptian government has supported this growth by amending laws, introducing new regulations, and streamlining business processes to boost foreign investment. In 2021, Egypt ranked second in M&A attractiveness after the U.S., with a 486% growth to USD 9.9 billion across 233 deals, according to an info graph from the cabinet’s Information and Decision Support Centre (IDSC).

Key Drivers of M&A Growth

Currently, Egypt is more than ready to host foreign investors. As time goes by, the authorities are constantly addressing any newly arising matters that have no governance from a legal standpoint. These regulatory reforms have reflected enormously on the country’s economic and corporate standings and resulted in its recent growth and emerging position of the Egyptian market compared to other relevant jurisdictions in the area, such as KSA and UAE, although it is a relatively smaller market.

The sectors with the highest growth rates are energy, TMT, healthcare, pharmaceuticals, consumer goods, finance, and banking.

Mergers Vs. Acquisitions

Although the terms merger and acquisition are often used interchangeably in the business world, there are key differences between them, as outlined below.

A Merger is an agreement where two companies combine to form a new entity, with the assets and liabilities of the seller transferred to the buyer. This process typically results in the dissolution of one company’s legal identity, integrating it into another to create a new legal entity. Mergers generally occur between companies of similar size or market scope, with goals to:

• Gain a larger market share.
• Reduce operational costs.
• Expand into new regions.
• Boost profitability for shareholders after the merger.

An Acquisition involves one company gaining control over another by acquiring shares, voting rights, or overall management control. Typically, a larger company buys a smaller one, becoming the dominant decision-maker. The acquiring company may:

• Purchase 100% of the target company’s shares, assets, and liabilities
• Acquire more than 50% of shares to gain controlling interest without full ownership

From a legal standpoint, in the context of an acquisition, the acquiring entity purchases a sufficient percentage of shares in the target company, granting it control, with the ownership stake potentially reaching up to 100%.

In contrast, a merger results in the complete transfer of assets and liabilities from the merged entity to the acquiring entity, leading to the removal of the merged entity from the commercial registry. However, in an acquisition, the target company remains registered, and its commercial record is not annulled.

Mergers, often between small and medium-sized companies, are a strategic move to form a powerful entity with technological and capital advancements. This helps them leverage global competition and achieve goals that they can’t accomplish alone, overcome existing challenges and sometimes even avoid bankruptcy.

Egypt As An M&A Destination

Egypt’s control of the Suez Canal positions it as a global trade hub, influencing investments in logistics, infrastructure, and energy. The canal facilitates trade between Europe, Africa, and Asia, enhancing its strategic importance. According to the FDI Report 2020, Egypt replaced South Africa as the second-ranked destination for FDI projects in the Middle East and Africa, experiencing a 60% increase in projects.

Egypt’s stability and military strength attract investors seeking to mitigate regional risks, while its integration into Africa’s growing economy and membership in the African Union make it a key hub for M&A activity, linking the Middle East and Africa.

The government has implemented a comprehensive economic development strategy aimed at boosting productivity, removing investment and trade barriers, improving governance, and reducing state involvement in the economy. Key initiatives include the expansion of over 6,000 km of new roads, recent upgrades to the electricity network have added approximately 14.8 GW of capacity, bringing Egypt’s total installed capacity to nearly 60 GW., and the signing of trade agreements with major blocs, including the QIZ agreement, EU-EFTA, Africa’s COMESA, and MENA & Gulf GAFTA.

Egypt, the most populous country in Africa and the Middle East, offers a large consumer market that attracts numerous international brands. Egypt’s competitive labor market provides skilled, cost-effective workers across sectors such as ICT, financial services, and tourism. With a workforce of nearly 30 million, Egypt has established itself as a regional hub for skilled labor, supported by national programs aimed at training and preparing workers. This combination of a large market and a skilled workforce enhances Egypt’s appeal to global businesses.

Overview of M&A activity in Egypt

Since 2021, the number of M&A deals in Egypt has dropped 53% on an annual basis to reach 139 deals in 2023, while their total value fell 62% to US$ 3.5 billion due to geopolitical tensions and macroeconomic challenges. The deals were in the financial services, consumer, healthcare and technology sectors.  The largest of these deals was UAE Global’s acquisition of 30% of Eastern Tobacco Company for more than 600 million dollars.

M&A deals in the second half of 2023 witnessed a 32% increase in the number of deals to reach 79 deals compared to 60 deals in the first half of 2023, while the total value of these deals increased by 383% from US$ 597 million to US$ 2.8 billion.

After a challenging couple of years, the Egyptian M&A landscape appears to be showing resilience, with a 21% year-on-year increase in M&A deals in H1 2024. The rebound signals continued investor interest in Egypt, despite a decline in M&A activity in 2023, largely due to currency instability.

The situation now appears to have improved. This has largely been driven by a US$35 billion investment from the UAE in Ras El Hekma, which has enabled key reforms – particularly around the currency – and helped reduce inflation. Additional support from the International Monetary Fund (IMF), the World Bank and the European Union (EU) also helped to avert a potential crisis. The Egyptian Prime Minister has anticipated a substantial influx of tourism upon the project’s completion, estimating that Ras El Hekma is poised to attract 8 million visitors to Egypt. This ambitious development will also see the establishment of an international airport south of the city. Egypt stands to benefit from the operational revenues of this new infrastructure, further boosting its economy.

The Ras El Hekma mega project and the State Ownership Policy (including IPO initiatives) further highlight Egypt’s commitment to fostering investment-friendly conditions.

Most Notable M&A Deals and Transactions

The largest announced deal in Egypt in the first half of 2024 was ICON‘s acquisition of a 51% stake in seven state-owned hotels in Cairo, Alexandria and Aswan for a total of US$ 800 million, including prominent properties such as Mövenpick Resort Aswan and Marriott Mena House Cairo this transaction was one of the five largest M&A deals in the Middle East in the first half of 2024.

Other notable deals in the first half of 2024 included B-Investments Holding’s acquisition of a majority stake in Orascom Financial Holding SAE for US$ 50 million and the acquisition of Yodawy by Ezdehar Mid-Cap Fund II for US$10 million.

In June 2024, European Commission President Ursula von der Leyen announced that European companies had signed agreements worth over €40 billion with Egyptian firms across various sectors, including hydrogen, water management, construction, chemicals, shipping, aviation, and automotive.

Additionally, BP has reaffirmed its commitment to Egypt by planning to invest up to US$ 1.5 billion in exploration activities over the next few years, with the possibility of further investments totaling nearly US$ 5 billion, hoping to speed up development and production plans to meet growing demand in the Egyptian energy market and support the country’s efforts to export energy surpluses.

On 26 February 2025, Fawry (FWRY.CA) announced EGP 80 million in strategic investments, acquiring 51% of Dirac Systems, 56.6% of Virtual CFO, and 51% of Code Zone, as part of its strategy to expand its “Fawry Business” suite, offering ERP, financial, accounting, and software development solutions, thus reinforcing its position as a leader in Egypt’s fintech sector and supporting the country’s digital transformation and cashless economy.

Sector-Specific M&A Trends

The energy sector, particularly natural gas and renewables has been a key driver of M&A activity. Egypt’s Zohr gas field, one of the largest in the Mediterranean, has attracted significant foreign investment, with companies like Eni and BP leading the charge. Additionally, the government’s push for renewable energy has spurred deals in solar and wind projects, supported by international funding from entities like the European Bank for Reconstruction and Development (EBRD).

The healthcare and life sciences sector experienced a 30% increase in deal activity compared to the first half of the year 2023. Egypt accounted for 50% of the total deal volume in the region.

Egypt’s Green Hydrogen Strategy has attracted global investors, with over USD 10 billion committed to renewable energy projects in 2024. The government anticipates that this initiative will boost Egypt’s GDP by $18 billion and generate over 100,000 jobs by 2040.

Telecom Egypt signed a USD 600 million agreement with Hungary’s 4iG to develop a state-of-the-art fiber optic network across the country.

M&A activity is rising in the tech and digital sectors as companies boost their digital capabilities. Egypt is emerging as a key hub for regional M&A deals, aided by its role in the COMESA Free Trade Area, which supports cross-border transactions in MENA and Africa.

Foreign Involvement In M&A Transactions In Egypt

Egypt’s M&A landscape is shaped by international investors, with key players from the Gulf Cooperation Council (GCC), Europe, the United States, China, and Russia.

Gulf Countries (Saudi Arabia, UAE, Qatar)

• Alignment with strategic plans like Saudi Arabia’s Vision 2030 and the UAE’s diversification initiatives.
• Active investments in real estate, construction, and renewable energy projects.
• Abu Dhabi, UAE – 16 December 2021: A consortium led by Aldar Properties (“Aldar”) and ADQ has successfully acquired approximately 85.52% of the outstanding share capital of The Sixth of October for Development and Investment S.A.E. (“SODIC” or “the Company”) (EGX: OCDI.CA). On 14 December 2021, the consortium completed the purchase of 304,628,772 shares, valued at EGP 6,092,575,440. The acquisition is controlled 70% by Aldar and 30% by ADQ.

European Union and Western Countries (UK, France, Germany)

• Trade agreements and EU partnerships provide preferential access to markets.
• EU’s Green Hydrogen Initiative boosts investment in renewable energy with German and French companies acquiring stakes in local green hydrogen projects.

United States

The U.S.-Egyptian partnership has made significant contributions to Egypt’s development. Key investments include $129 million to enhance the private sector, education, health services, and government transparency. Since 2011, 21 STEM and 10 vocational technology schools have been established. U.S. universities are exploring branch campuses in Egypt, and $63 million has funded 65 Career Centers across 53 universities to equip students with job skills.

Over 30 years, $140 million has supported the preservation of cultural sites like the Sphinx and Abu Simbal. The partnership has also facilitated study abroad opportunities for 1,000 Egyptian students, while 25,000 students are learning English, and over 20,000 Egyptians have participated in exchange programs. Three American Spaces in Egypt reached nearly 37,000 participants in 2023 with programs on civil society, climate change, and economic prosperity.

China and The Belt and Road Initiative

Egypt’s Vision 2030 and China’s Belt and Road Initiative are closely aligned, with China playing a pivotal role in driving Egypt’s industrial development. Key financial agreements, including currency swaps and loans, have further solidified the bilateral partnership. Additionally, Egypt is benefiting from support for solar power projects through China’s development banks. In 2023, China exported US$13.3 billion to Egypt, primarily in electronics, machinery, and vehicles, reflecting Egypt’s increasing demand for advanced technology as it modernizes its economy.

Russia’s Role in Egypt’s Energy Sector

Russia plays a pivotal role in Egypt’s energy sector, particularly in nuclear power. Projects such as the construction of Egypt’s first nuclear power plant in Dabaa highlight Russia’s long-term economic involvement.

Key Laws Governing M&A Transactions

Egypt’s legal framework is mainly a civil law system, derived from the Napoleonic (French) Code, as well as Islamic Sharia. Along with the general provisions outlined in the Civil Code, M&A transactions in Egypt are governed by various specific laws, which vary depending on whether the transaction is public or private as follows:

• Egyptian Employment Law (Law No. 12 of 2003) governs employment relations.
• Egyptian Income Tax Law (Law No. 91 of 2005) and the VAT Law (Law No. 67 of 2016) regulate tax matters related to M&As
• The Listing and De-listing Rules (Law No. 11 of 2014) and the 2023 FRA Decree govern securities on the Egyptian Exchange (EGX)
• Disputes in M&As are resolved under Egypt’s Arbitration Law (Law No. 27 of 1994), with the Cairo Regional Centre for International Commercial Arbitration (CRCICA) providing a platform for cross-border disputes
• The CBE (Law No. 194 of 2020) monitors financial stability, supporting M&A transactions, while the
• Private Data Protection Law (Law No. 151 of 2020) governs data handling in private M&As.

Regulatory Authorities and Their Roles

Commercial practices and case law also influence M&A transactions. The following authorities oversee these processes:

• The General Authority for Investment and Free Zones (GAFI) governs corporate resolutions
• the Egyptian Financial Regulatory Authority (FRA) supervises financial transactions
• MISR for Central Clearing, Depository, and Registry (MCDR) handles financial tools and transactions
• the Egyptian Stock Exchange (EGX) manages listed securities
• the Central Bank of Egypt (CBE) regulates certain transactions, and the
• Egyptian Competition Authority (ECA) ensures compliance with competition laws.
• Other ministries, including the Ministry of Finance, Ministry of Transportation, and the Egyptian Drug Authority (EDA), may also be involved, depending on the nature of the transaction.
• Egypt has signed Double Taxation Agreements (DTAs) with over 60 countries, which can significantly impact the tax liabilities of cross-border M&A transactions. These agreements often provide reduced withholding tax rates on dividends, interest, and royalties, making Egypt a more attractive destination for foreign investors.

Recent Legal and Regulatory Reforms in Egypt

In recent years, Egypt has implemented several legal and regulatory reforms to improve the investment climate and strengthen the economy. Amendments to corporate law have updated shareholder rights, disclosure requirements, and introduced measures to enhance corporate governance and simplify cross-border transactions. The government has also prioritized digital transformation through the ‘Digital Egypt’ initiative, aiming to digitize services like investment approvals and corporate registrations to reduce delays and increase transparency.

Corporate Law Amendments

• Egypt has updated itsCompanies Law (Law No. 159 of 1981) to strengthen shareholder rights and improve corporate governance.
• Amendments toListing and De-Listing Rules (FRA Decree No. 177 of 2023) introduced enhanced disclosure and transparency requirements for publicly traded companies.

Investment Law Updates

• TheInvestment Law No. 72 of 2017, amended by Law No. 160 of 2023, expanded tax incentives for specific projects and streamlined approval processes for foreign direct investment (FDI).
• TheGolden License Initiative introduced a fast-track investment approval process, reducing bureaucratic hurdles for major projects.

Competition Law Amendments and Pre-Approval for M&A

• Law No. 3 of 2005, as amended by Law No. 175 of 2022, introduced a mandatory pre-approval process for mergers and acquisitions.
• This ensures greater transparency in foreign investment transactions by requiring regulatory clearance before deals can proceed.
• The Egyptian Competition Authority (ECA) oversees compliance, ensuring that cross-border M&A deals do not lead to market monopolization or unfair competition.

Foreign Exchange Regulations for Currency Repatriation

• The Central Bank of Egypt (CBE) has introduced new foreign exchange regulations to address concerns about the repatriation of foreign currency earnings by international investors.
• These regulations are intended to ease capital movement restrictions and ensure that foreign investors can safely transfer their returns out of Egypt without bureaucratic delays.

New Tax Incentives for Industrial Investment Projects

• Egyptian Cabinet Decree No. 77 of 2023 provides additional tax incentives to industrial investment projects and their expansions.
• This decree complements (but does not replace) existing incentives under the Investment Law, offering further tax relief to encourage both new projects and expansionsin key industries.
• The new tax incentives improve Egypt’s attractiveness for cross-border industrial investment, especially in manufacturing, energy, and infrastructure development.

Foreign Ownership of Desert Land for Investment Projects

• Amendment to the Desert Land Law (3 January 2024) removes previous restrictions that required Egyptian nationals to hold at least 51% of company capital and limited individual foreign ownership to 30%.
• The amendment explicitly allows foreign investors to own desert land for investment purposes under the Investment Law’s provisions.
• This change significantly improves foreign investor confidence, particularly in sectors such as agriculture, renewable energy, tourism, and real estate development.

Updates to Regulations on Unlisted Securities Trading 

Egyptian Financial Regulatory Authority (FRA) Decision No. 303 of 2024, which amends Decision No. 94 of 2018, introduces the following key changes:

Increased FRA Approval Threshold:

• Previously, transactions exceeding 20 million EGPrequired FRA approval.
• Under the new amendment, this threshold has been raised to 60 million EGP, reducing regulatory burdens for mid-sized transactions.

Extended Bank Deposit Period for Securities Settlement:

• The settlement period for bank deposits related to securities transactions is now extended to two months.
• FRA approval is required for deposits exceeding this timeframe, ensuring regulatory oversight while allowing greater flexibility for cross-border investors.

The most dangerous mistake one can make after the announcement of the (partial) suspension of U.S. duties for 90 days is to hope that everything will go well and we will return to the pre-April 2 world.

First, because very invasive tariffs remain in place: 10 percent on all countries that trade with the U.S., including the EU, 25 percent on automotive, 25 percent on steel and aluminum, 145 percent on China.

Second, because it is impossible to predict the actions of the U.S. Administration in the short and medium term: it cannot be ruled out that tariffs will remain, increase, change targets or that other factors will intervene to turn the tide in international markets, such as an escalation of the trade war with China.

The 90-day suspension is an opportunity

The U.S.’s temporary suspension of tariffs represents a valuable window that should be used not only as a truce but also as a valuable room for action: 90 days to rehash contracts, renegotiate key clauses, and insert levers of flexibility that can protect business in various future scenarios in the U.S. and other markets.

Today’s exporters cannot afford to “sit back and see what will happen”-it is time to act, and to do so professionally and strategically. Let’s look at a checklist of important points to consider.

What do contracts with customers and suppliers entail?

The first point is to survey agreements with the trade network in the U.S. and other countries that export to the U.S., as well as with upstream suppliers in the supply chain.

Is there a written contract? The worst-case scenario – unfortunately a very frequent one – is when the parties cooperate informally, only based on orders and order confirmations. This leaves undefined not only what happens in the case of imposition of duties, but also a whole range of other points, for example, limits on damages that can be claimed in the case of breach of contract, the duration of the agreement, the applicable law, and how any disputes will be resolved.

Another very problematic scenario is one in which contracts exist, but they are generic and do not include the necessary covenants to manage the risks involved in operating in a highly litigious market such as the U.S., which, moreover, has very high legal costs.

Having done this analysis, the necessary actions can be put in place, prioritizing according to the importance of business relationships and as appropriate:

• Negotiate and conclude a written contract from scratch
• Replace the existing agreement with a complete and correct contract
• Amend and integrate the existing agreement with pacts to manage tariffs and other causes of price fluctuations

Let us dwell on the last scenario, assuming that there is a complete and correct contract but one that does not regulate price and cost fluctuation as a direct or indirect consequence of the introduction of duties.

Contract Addendum

In such cases, the correct course of action is to sign an Addendum to the original contract, specifying which covenants are being waived and which covenants are being added. It is essential that the Addendum be negotiated and signed by persons with the power of representation of the parties and that it be drafted with the help of lawyers who specialize in this field. In addition to including correct clauses, it is necessary to verify that the covenants are valid according to the rules of law applicable to the contract.

Here are some clauses that can be the subject of the Addendum, to be modulated according to the specific case and possible scenarios.

Tariff Cost Sharing

By introducing this covenant, it is provided that in the event that duties are confirmed at [x]% or are reduced or increased within certain established thresholds, the Parties will share the increase equally, or according to other established percentages.

There may also be a ceiling on tariffs beyond which a party has the right to withdraw from the contract or request the suspension of certain orders for a specified period of time, after which it has the right to withdraw.

Price Adjustment

With this covenant, a discount or an increase in the product’s price is agreed upon, as the case may be, in the case of a duty greater than [x]%.

Among the use cases, in addition to that of the company exporting to the U.S. or other intermediate markets, with final destination of the products in the U.S., is that of those who purchase a product subject to import duty and resell it, processed or assembled.

Right to Cancel or Postpone Confirmed Orders

This covenant gives the right to revoke or suspend for a certain period already negotiated orders, as such binding, in case of confirmation or introduction of duties above a certain threshold, for example, if 20% taxation was confirmed for the import of wine from the EU.

The clause can be combined with previous covenants, for example, by stipulating that below the specified threshold, the contracts remain valid, and the parties share the duty or have the right to renegotiate the price.

Supply Forecast Adjustment

With this clause the Parties can modify supply programs already agreed for a specific duration (e.g., 24 months), with continuous sales and purchase obligations at a fixed price or indexable only within certain limits. The aim is to agree on the prerequisites for reshaping supply programs in the short and medium term, which can be very useful for defining the rules that will apply to relationships with key suppliers or customers for possible changes in volumes, delivery times, and prices.

Right to Source from Alternative Suppliers

This covenant serves to be authorized, if necessary, to source alternative suppliers of components or raw materials to those previously authorized in the contract with the end customer, for example, in cases where purchasing from the original suppliers has become too costly or difficult due to duties imposed at import or in previous steps in the supply chain, or other events such as currency or price fluctuation of certain commodities beyond a certain level established in the agreement.

Hardship and Force Majeure

The imposition of duties cannot be invoked as a cause of Force Majeure or hardship, respectively, to excuse contract non-performance or to renegotiate the price, even in cases of very high price increases (such as the 145% duty imposed on Chinese products). This conclusion is almost uniform under the law and jurisprudence of the major countries involved in the tariff war: U.S., China, Canada, Mexico, France and Italy: I refer to this practical guide for a timely examination of what the various rules provide.

If the contract lacks a well drafter Force Majeure and Hardship clause, or contains a generic clause, it is important to get your hands on revising it to expressly state the cases in which a party is entitled to suspend or terminate the contract, how and when to communicate the decision to invoke the exemption, and the consequences on the parties’ contractual obligations. You can go deeper on this topic here.

Conclusion

It is essential to prepare for possible future scenarios regarding duties (confirmed, increased, changed, or decreased) and to determine the consequences on trade relations with foreign clients and suppliers: moving today, at a standstill (or nearly so), allows entrepreneurs to negotiate shared and fair solutions and to avoid, as far as possible, the emergence of tensions and conflicts with the various partners along the international supply chain.

The Brazilian market has not been immune to the protectionist wave of “America First.” If such measures persist over time, they could have a lasting impact on the local economy. Still, a sour lemon can often become a sweet caipirinha in the resilient and optimistic spirit that characterizes both Brazilian society and its entrepreneurs.

As is often the case in the chessboard of global economic geopolitics, a move from one player creates room for another countermove. Brazil reacted with reciprocal trade measures, signaling clearly that it would not accept a position of commercial vulnerability.

This firmer stance — almost unthinkable in earlier years — strengthened Brazil’s image in Europe as a country ready to reposition itself with greater autonomy and pragmatism, opening new doors to international markets. In a world where global value chains are being restructured and reliable trade partners are in high demand, Brazil is increasingly seen not just as a supplier of raw materials, but as a strategic partner in critical industries.

The rapprochement with Europe has been further energized by progress in the Mercosur–European Union Agreement, whose negotiations spanned decades and now seem to be gaining momentum. While the United States embraces a more isolationist commercial posture, Europe is actively diversifying its trade relations — and Brazil, by demonstrating a commitment to clear rules, economic stability, and legal certainty, emerges as a natural candidate to fill that gap.

The Direct Impact of U.S. Tariffs

The trade measures introduced under President Trump primarily affected Brazilian producers of semi-finished steel and primary aluminum, with the removal of long-standing exemptions and quotas. In 2024, Brazil exported US$ 2.2 billion in semi-finished steel to the United States, representing nearly 60% of U.S. imports in that category. In the same year, Brazilian aluminum exports to the U.S. reached US$ 796 million, accounting for 14% of the sector’s total. Losses in exports for 2025 are estimated at around US$ 1.5 billion.

Brazil’s Response and a New Phase

In April 2025, the Brazilian Congress passed a new legal framework for trade retaliation, empowering the Executive Branch to adopt countermeasures in a faster and more technically structured way. The new legislation allows, for example, the automatic imposition of retaliatory tariffs on goods from countries that adopt unilateral measures incompatible with WTO norms; the suspension of tax or customs benefits previously granted under bilateral agreements; the creation of a list of priority sectors for trade defense and diversification of export markets.

Beyond the retaliation itself, the move marked a significant shift in posture: Brazil began positioning itself as an active player in global trade governance, aligning with mid-sized economies that advocate for predictable, balanced, and rules-based trade relations.

An Opportunity for Brazil–Europe Relations

This new stage sets Brazil as a reliable supplier to European industry — not only of raw materials but also of higher-value-added goods, particularly in processed foods, bioenergy, critical minerals, pharmaceuticals, and infrastructure.

Moreover, as US–China tensions drive European companies to seek nearshoring or “friend-shoring” strategies with more predictable partners, Brazil, with its clean energy matrix, large domestic market, and relatively stable institutions, emerges as a strong alternative.

Legal Implications and Strategic Recommendations

This changing landscape brings new opportunities for companies and legal advisors involved in Brazil–Europe investment and trade relations. Particular attention should be paid to:

• Monitoring rules of origin in the Mercosur–EU agreement, especially in sectors requiring supply chain restructuring;
• Reviewing contractual and tax structures for import/export operations, including clauses addressing tariff instability or non-tariff barriers (e.g., environmental or sanitary standards), and clearly defining force majeure events;
• Reassessing distribution and agency agreements in light of the new commercial environment;
• Exploring joint ventures and technology transfer arrangements with Brazilian partners, particularly in bioeconomy, green hydrogen, and mineral processing.

From lemon to caipirinha

The world is becoming more fragmented and competitive, but also more open to realignment. What began as a protectionist blow from the United States has revealed new opportunities for transatlantic cooperation. For Brazil, Europe is no longer just a client: it is poised to become a long-term strategic partner. It is now up to lawyers and businesses on both sides of the Atlantic to turn this opportunity into lasting, mutually beneficial relationships.

On April 2, 2025, U.S. tariffs toward products from the EU will go into effect.

Given what happened with the tariffs imposed on Canada and Mexico, with a chase of announcements of entry into force and suspensions and new announcements, it is impossible to make even short-term predictions.

One must prepare oneself for the possibility of imposition of duty, which is a foreseeable and anticipated event and, as such, should be regulated in the contract. Failure to do so is likely to be very costly because there are no valid arguments for excusing the non-performance of contracts already concluded by invoking a situation of Force Majeure (which does not exist, because the performance has not become objectively impossible) or of supervening excessive onerousness or hardship: even in the case of increases well over 25 percent, tribunals around the world tend to rule out its invocation).

The caution that can be taken is to negotiate a price update clause, expressly referring, among other factors, to the eventual adoption of tariffs.

A useful clause may be the so-called Escalator or Price Adjustment Clause, by which the right to renegotiate the price is provided in the case of imposing a duty above a certain threshold, for example:

PRICE ADJUSTMENT CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if:

• There is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods or services by X% or more.
• Such an increase affects either (i) the Buyer directly or (ii) the Seller due to tariffs imposed on its upstream suppliers, materially impacting the cost of performance.

Trigger Mechanism

In the event of a Triggering Event:

• The affected Party shall notify the other Party in writing within thirty (30) days of the effective date of the customs duty change or the introduction of the new trade barrier.
• The notification must include supporting documentation demonstrating the financial impact of the Triggering Event.

Renegotiation Process

Upon receipt of a valid notification, the Parties shall engage in good-faith negotiations for sixty (60) days to agree on an adjusted price that reflects the increased costs.

Failure to Reach an Agreement

If the Parties fail to reach an agreement on the price adjustment within the prescribed sixty (60) days:

Option 1 – Contract Termination: Either Party shall have the right to terminate the contract by providing written notice to the other Party, without liability for damages, except for obligations already accrued up to the termination date.

Option 2 – Third-Party Arbitrator: The Parties shall appoint an independent third-party arbitrator with expertise in international trade and pricing. The arbitrator shall determine a fair market price, which shall be binding on both Parties. The cost of the arbitrator shall be borne equally by both Parties unless otherwise agreed.

***

Another possible tool as an alternative to the clause just seen is the so-called Cost Sharing clause, for example:

COST SHARING CLAUSE

Triggering Event

A “Triggering Event” shall be deemed to occur if there is an increase in customs duties or the introduction of new trade barriers not previously contemplated, resulting in an increase in the total price of the goods by [X]% or more. Such an increase will be borne by the Buyer by up to [X]%, while higher increases will be shared equally between the seller and buyer.

***

It is appropriate for such clauses to be adapted on a case-by-case basis to best to reflect the scenarios that are expected to affect the price of the products, namely

• imposition of duty on U.S. entry
• imposition of duty on EU entry

but also indirect effects, such as where it is the seller who invokes price renegotiation, for example because the price of the product has increased due to the duty paid by one of its upstream suppliers in the supply chain, in which case it is crucial to identify which products are relevant and to document the increases resulting from the imposition of tariffs.

“This agreement is not just an economic opportunity. It is a political necessity.” In the current geopolitical context of growing protectionism and significant regional conflicts, Ursula von der Leyen’s statement says a lot.

Even though there is still a long way to go before the agreement is approved internally in each bloc and comes into force, the milestone is highly significant. It took 25 years from the start of negotiations between Mercosur and the European Union to reach a consensus text. The impacts will be considerable. Together, the blocs represent a GDP of over 22 trillion dollars, and are home to over 700 million people.

Our aim here is to highlight, in a simplified manner, the most important information about the agreement’s content and its progress, which we will update here at each stage.

What is it?

The agreement was signed as a trade treaty, with the main goal of reducing import and export tariffs, eliminating bureaucratic barriers, and facilitating trade between Mercosur countries and European Union members. Additionally, the pact includes commitments in areas such as sustainability, labor rights, technological cooperation, and environmental protection.

Mercosur (Southern Common Market) is an economic bloc created in 1991 by Brazil, Argentina, Paraguay, and Uruguay. Now, Bolivia and Chile participate as associated members, accessing some trade agreements, but not fully integrated into the common market. On the other hand, the European Union, with its 27 members (20 of which have adopted the common currency), is a broader union with greater economic and social integration compared to Mercosur.

What does the EU Mercosur agreement include?

Trade in goods:

• Reduction or elimination of tariffs on products traded between the blocs, such as meat, grains, fruits, automobiles, wines, and dairy products (the expected reduction will affect over 90% of the traded goods between the blocks).
• Easier access to European high-tech and industrialized products.

Trade in services:

• Expands access to financial services, telecommunications, transportation, and consulting for businesses in both blocs.

Movement of people:

• Provides facilities for temporary visas for qualified workers, such as technology professionals and engineers, promoting talent exchange.
• Encourages educational and cultural cooperation programs.

Sustainability and environment:

• Includes commitments to combat deforestation and meet the goals of the Paris Agreement on climate change.
• Provides penalties for violations of environmental standards.

Intellectual property and regulations:

• Protects geographical indications for European cheese, wines, and South American coffee and cachaça.
• Harmonizes regulatory standards to reduce bureaucracy and avoid technical barriers.

Labor rights:

• Commitment to decent working conditions and compliance with International Labor Organization (ILO) standards.

Which benefits to expect?

• Access to new markets: Mercosur companies will have easier access to the European market, which has more than 450 million consumers, while European products will become more competitive in South America.
• Costs reduction: The elimination or reduction of tariffs could lower the prices of products such as wines, cheese, and automobiles and boost South American exports of meat, grains, and fruits.
• Strengthened diplomatic relations: The agreement symbolizes a bridge of cooperation between two regions historically connected by cultural and economic ties.

What’s next?

The signing is only the first step. For the agreement to come into force, it must be ratified by both blocs, and the approval process is quite distinct between them, since Mercosur does not have a common Council or Parliament.

In the European Union, the ratification process involves multiple institutional steps:

• Council of the European Union: Ministers from the member states will discuss and approve the text of the agreement. This step is crucial, as each country has representation and may raise specific national concerns.
• European Parliament: After approval by the Council, the European Parliament, composed of elected deputies, votes to ratify the agreement. The debate at this stage may include environmental, social, and economic impacts.
• National Parliaments: In cases where the agreement affects shared competencies between the bloc and member states (such as environmental regulations), it must also be approved by the parliaments of each member country. This can be challenging, given that countries like France and Ireland have already expressed specific concerns about agricultural and environmental issues.

In Mercosur, the approval depends on each member country:

• National Congresses: The agreement text is submitted to the parliaments of Brazil, Argentina, Paraguay, and Uruguay. Each congress evaluates independently, and approval depends on the political majority in each country.
• Political Context: Mercosur countries have diverse political realities. In Brazil, for example, environmental issues can spark heated debates, while in Argentina, the impact on agricultural competitiveness may be the focus of discussion.
• Regional Coordination: Even after national approval, it is necessary to ensure that all Mercosur members ratify the agreement, as the bloc acts as a single negotiating entity.

Stay tuned: you will find the update here as the processes advance.

The recent announcement of a landmark trade agreement framework, following just three months negotiations since President Trump’s tariffs announcement on 2 April 2025, signals a pivotal shift, not merely in bilateral relations, but in the broader architecture of global supply chains.

As a commercial lawyer with exposure to Vietnam since 2007, I have observed the evolving dynamics between the United States and Vietnam through the years, talking to students, entrepreneurs, veterans, diplomats, humans from all walks all life, from both nations and beyond.

You may recall that Vietnam, with the notable exclusion of China, was to be the nation that would encounter the most stringent tariffs imposed by the Trump administration, reaching an astonishing 46%.

The newly forged framework outlines significant reciprocal concessions designed to foster greater trade and investment flows. Granted, pre-April 2 tariffs applied by the USA on Vietnamese goods were lower than what emerges from the framework agreement, but still, it is better than 46%),

The United States has committed to imposing a 20% tariff on most Vietnamese imports, a notable reduction from the previously mooted 46%. However, a substantial 40% tariff will apply to goods re-exported from third countries, with a particular focus on those originating from China.

Vietnam has pledged to open its market to a wide array of US products. Crucially, it has also committed to implementing stringent measures aimed at restricting the transshipment of Chinese goods through its territory, a long-standing concern for Washington.

In a significant win for American exporters, US goods will now enjoy duty-free access to the Vietnamese market, effectively granting “total access”, particularly for large-engine vehicles such as SUVs, as emphatically stated by President Trump (how SUVs are going to circulate in the narrow alleys of Hanoi and Ho Chi Minh City, infested by swarms of mopeds, is a different story).

This agreement is expected to catalyse growth in several key sectors. Electronics, textiles, furniture, energy (especially Liquefied Natural Gas), and agriculture are poised for expansion. US firms specialising in manufacturing technology, energy solutions, and agricultural products are anticipated to be the primary beneficiaries. Furthermore, beyond immediate trade benefits, the agreement is set to reshape investment strategies, encouraging a greater localisation of supply chains within Vietnam. This strategic realignment is also expected to further solidify the already robust US-Vietnam Comprehensive Strategic Partnership.

While the potential upsides are considerable, it is imperative for businesses and investors to approach this new landscape with a clear understanding of the accompanying risks. From my vantage point, I identify several significant execution challenges and structural impediments that require close monitoring.

Enforcement of Transshipment Controls

The most immediate and perhaps formidable risk lies in the effective enforcement of transshipment controls. Vietnam has historically served as a significant assembly point for Chinese-manufactured components. Ensuring that goods originating from China are not merely re-routed through Vietnam to circumvent US tariffs will require exceptionally close monitoring and robust verification mechanisms. The legal and practical complexities of definitively determining the true country of origin for all goods will undoubtedly pose a persistent challenge. As a European citizen, witnessing how the EU-Vietnam Free Trade Agreement (“EVFTA”), which poses an important stress on certificates of origin, I am particularly aware of this matter.

While Vietnam has made remarkable strides in its economic development, certain structural issues could hinder its capacity to scale up high-value manufacturing in the short to medium term. These include:

Legal framework nuances

Vietnam’s legal framework for foreign investment has seen continuous improvements, but legal and cultural complexities and inconsistencies can and do still arise. Navigating the regulatory landscape, particularly with new rules stemming from this agreement and at a time of deep administrative, governmental, digital and legal reforms in Vietnam, will demand expert legal guidance to ensure compliance and mitigate potential fines and disputes. Issues surrounding so-called sublicences for businesses, intellectual property rights enforcement and contract enforceability, whilst improving, still require careful consideration;

Education

The ambition to transform Vietnam into a high-value manufacturing hub necessitates a workforce equipped with advanced skills. While the Vietnamese government prioritises education and workforce development, a significant portion of the current labour force lacks formal training and specialised certifications, let alone a good command of the English language. Bridging this skills gap, particularly in areas like advanced manufacturing, engineering, and digital technologies is a necessity and not just in light of this framework agreement. Companies may need to factor in substantial investment in training and upskilling programmes for their Vietnamese employees.

Infrastructures

Despite considerable investment, Vietnam’s infrastructure, particularly in logistics, energy, and transportation, continues to face bottlenecks. And China – the apparent target of Trump’s tariffs – is stepping in with high-speed trains connecting it to the northern Provinces of Vietnam. An increased volume of high-value manufacturing and trade will place further strain on existing infrastructure. Inadequate port capacity, congested roads, and a reliable energy supply (including for EV charging) are critical concerns that could impact efficiency and increase operational costs for businesses.

Policy divergence

This framework agreement deepens US-Vietnam trade ties and seems to be paving the way for more US investments in Vietnam, but this second aspect seems to run counter to parallel US policy objectives aimed at reshoring manufacturing back to the United States. This potential divergence in strategic priorities could introduce yet another element of unpredictability in the long term, necessitating a flexible and adaptable investment approach. Future shifts in US policy could impact the durability and full extent of the benefits derived from this agreement.

This trade agreement, if finalised and implemented, undoubtedly represents a structural shift in global trade dynamics. It strategically positions Vietnam as an increasingly important high-value manufacturing hub and significantly deepens US engagement in Southeast Asia. We will need time, however, to assess the practical impact of the agreement, observing the efficacy of its implementation, and understanding how Vietnam’s inherent strengths and challenges will ultimately shape its role in the reconfigured global supply chain.

We will also need to see what China, if anything, will do as a countermeasure. In fact, any assessment of Vietnam’s evolving trade landscape would be incomplete without a thorough consideration of China’s influence and strategic posture. President Xi Jinping has consistently championed a vision of a “community of shared future for mankind,” a concept that, while outwardly promoting global cooperation, also subtly underscores a demand for international alignment with Beijing’s interests. In the context of escalating trade tensions, Xi has repeatedly warned that “trade wars have no winners,” advocating for unity against protectionist measures, yet simultaneously implying that nations must ultimately choose sides, either with or against China’s economic and political orbit. Vietnam, despite its historical complexities and occasional maritime disputes with Beijing in the South China Sea (or East Sea, as it is officially called by Hanoi), remains deeply interwoven with China’s economy. China has been Vietnam’s largest trading partner for many years, with significant inflows of Chinese FDI, loans, and project contractors. This economic dependency is particularly evident in various sectors, where Chinese components and materials form a substantial part of Vietnamese manufacturing supply chains. While Vietnam has actively sought to diversify its trade partners and reduce its reliance on China, the sheer scale of the bilateral economic relationship means that disentanglement is a long-term, complex endeavour. Furthermore, China’s influence extends beyond direct trade into crucial regional resources. The Mekong River, a lifeline for millions in Southeast Asia, originates in China, which has constructed numerous upstream dams.

As Vietnam navigates its enhanced trade relationship with the United States, it must simultaneously contend with the enduring economic gravity and strategic ambitions of its northern giant neighbour. Any perceived move by Vietnam to significantly shift away from China could invite retaliatory measures or heightened pressure from Beijing. Businesses investing in Vietnam must not only grasp the intricacies of the US-Vietnam agreement but also meticulously analyse how these developments will intersect with, and potentially be impacted by, the intricate, often delicate, and sometimes fraught relationship between Hanoi and Beijing. Understanding this geopolitical tightrope will be essential for sustainable success in the Vietnamese market. Prudence, informed legal counsel, and a keen eye on evolving geopolitical and economic realities will be paramount for those seeking to capitalise on this transformative new chapter.

Takeaways

• Tariffs:The US-Vietnam framework agreement marks a significant departure from previous trade dynamics, reducing US tariffs on most Vietnamese imports to 20% (from a mooted 46%) while imposing a 40% tariff on transshipped goods, especially from China.
• Vietnam’s market opening:Vietnam has committed to duty-free access for a broad range of US products and stricter controls on Chinese goods transiting its territory.
• Growth / manufacturing shift potential:The agreement is expected to fuel expansion in Vietnamese electronics, textiles, furniture, energy (LNG), and agriculture. It also encourages supply chain localisation within Vietnam (normally more of an assembly point for Chinese products).
• Execution challenges: Effectively preventing the re-routing of Chinese goods through Vietnam to avoid tariffs will be a complex and demanding task; Despite economic progress, Vietnam faces hurdles in scaling high-value manufacturing due to legal framework nuances (e.g., sublicences, IP enforcement), a skills gap in its workforce (lack of formal training, English proficiency) and infrastructure bottlenecks (logistics, energy, transportation).
• US policy divergence:The agreement’s encouragement of US investment in Vietnam appears to contradict the broader US policy objective of reshoring manufacturing.
• China:Businesses must consider China’s significant economic sway over Vietnam, including its position as Vietnam’s largest trading partner, its FDI, and its control over shared resources like the Mekong River. Any major shift by Vietnam away from China could lead to retaliatory measures from Beijing.
• Uncertainty:This is not a final agreement, so the situation might change. Prudence and informed legal counsel are crucial for businesses navigating this evolving landscape.

The Trump approach: power and dominance

In his autobiography, The Art of the Deal, Donald Trump describes negotiation as a contest of strength, determination, and dominance. His vision is clear: anyone who shows uncertainty or makes concessions too early is immediately perceived as a loser. His negotiating style is based on constant pressure, maximalist demands, and calculated threats, to obtain unilateral advantages. In this scheme, compromise is not a point of arrival, but a sign of weakness to be avoided.

Trump has always been a competitive negotiator, focused on immediate results and uninterested in balanced solutions unless they are strictly functional to his interests.

Other negotiating styles: compromising and collaborative

In contrast to this competitive approach, there are two other relevant negotiating styles:

• The compromising style aims to reach a ‘middle ground’ agreement, in which both parties give something up to achieve an acceptable solution. It is a pragmatic approach, practical in situations where time is limited or positions are too far apart for genuine collaboration.
• The collaborative style, on the other hand, aims to create win-win solutions. The parties seek to thoroughly understand each other’s interests and work together to build an outcome that maximizes the benefit for both. It requires openness, time, and trust.

In commercial negotiations, the compromising or collaborative approach can only work if the other party shares the same logic. But when dealing with an explicitly competitive actor such as Trump, adopting a compromising style risks seriously penalizing the other party, for at least three reasons:

• It conveys weakness

An accommodating gesture is seen not as a sign of openness, but as a point of pressure to be exploited. The competitive negotiator, focused on gaining an immediate advantage, interprets it as a willingness to give even more.

• It relinquishes bargaining power

The EU has a vast market and significant trade levers, especially in a context where the US is closing the door to the Chinese market. Offering concessions at the outset is tantamount to burning your cards without getting anything in return. In a competitive confrontation, the first move can set the tone for the negotiation: once a concession has been made, it is very difficult to backtrack.

• It legitimizes the negotiating imbalance

An unbalanced compromise, if accepted without resistance, risks becoming the new basis for future trade relations, systematically penalizing the EU in subsequent rounds.

Why 30%? The anchor technique

Trump often uses a negotiating technique known as the anchor technique. This consists of deliberately setting a very high target at the beginning of the negotiation (in our case, the threat of 30% tariffs).

The aim is to create a psychological perimeter for the negotiation and force the other party to reason on the basis of that figure, even though they are aware that it is arbitrary. This technique allows one to influence the scope of the discussion and obtain greater concessions, just as Trump has done.

The worst response: unilateral concessions with no return

Unfortunately, the European Union has already shown worrying signs of a compromising attitude that has not been negotiated with the Trump administration, for example:

• The waiver of the web tax* on American digital giants, without obtaining any regulation or shared tax contribution in return.
• The offer to increase imports of liquefied natural gas (LNG) from the US, made to reassure Washington, without obtaining anything in return.
• The acceptance of the increase in NATO spending to 5% of GDP, demanded by Trump, again without obtaining anything in return.

All these offers without asking for anything in return reinforce the idea that the EU is willing to concede from the outset. Trump, true to his competitive logic, sees these concessions as a starting point, not a compromise: this pushes him to raise his demands, not moderate them.

Persevering would be a fatal mistake

Continuing along this path of compromise, in the hope that accommodation will ease the pressure, would be not only ineffective but counterproductive. With a competitive negotiator, unilateral concessions do not stop escalation: they fuel it. Any sign of weakness is interpreted as additional room for maneuver.

A helpful example is China’s reaction during the trade war initiated by Trump. Faced with massive tariffs imposed by the US, Beijing responded in kind, imposing equivalent tariffs. Instead of giving in, it spoke the same language of power. The result is there for all to see: after weeks of escalation, the US had to moderate its position, opening up to a more balanced agreement.

The right strategy: speak his language

To avoid the mistakes of the past, the EU should therefore reverse its negotiating logic. Not to fuel confrontation, but to restore a credible balance. Some applicable countermeasures could be:

• Target Trump’s electoral base, particularly the agricultural sectors (soy, corn, beef), with selective tariffs or targeted restrictions.
• Put the European web tax* back on the table, even with a minimum rate, linking any exemptions to real concessions from the US.

These well-calibrated moves would strengthen the EU’s position and show that it can defend its interests by speaking a language Trump understands: that of strength and bargaining power.

Going beyond requests, seeking the other party’s interests

A fundamental principle in any negotiation is to identify the other side’s interests and find a way to allow them to achieve them without sacrificing your own. This is no easy task, given Trump’s notorious volatility and the lack of sound arguments to justify the demands made in the negotiations.

In the case of the EU-US negotiations, it must be borne in mind that Trump is playing the game with his electoral base in mind: an agreement must offer him a narrative of victory to communicate to his electorate.

Takeaway

When negotiating with a competitive player like Trump, one should abandon the accommodating approach, avoid concessions without something in return, and adopt a style that is more assertive, strategic, and symmetrical.

Only then will it be able to build an agreement that is solid, fair, and respectful of its economic and political strength.

Building on the strategic overview from Part 1, this second part is your guide through the intricate maze of M&A in Egypt. It uncovers the layers that make Egypt a strategic hub for investment. This part is designed for both investors seeking to navigate M&A transactions and knowledge seekers looking to understand the legal landscape in depth. Whether you’re structuring a deal or simply exploring, it will lead you through each legal step, with practical insights to help you understand the regulations, tax considerations, and labour laws at play. Think of it as your map, lighting the path to successful transactions, and equipping you with the tools you need to thrive in one of the most dynamic economies in the region.

EMPLOYMENT LAW AND M&A TRANSACTIONS

The Employment Law protects employees in areas like termination, dues, and compensation, with regulations favoring them over employers. In M&A transactions, employees’ rights must remain unaffected by the changes. For example, an acquisition cannot alter an employee’s role or classification, and the employment structure must remain intact post-transaction.

The rise of remote work, accelerated by the COVID-19 pandemic, has also influenced M&A transactions, particularly in the TMT sector. Companies are increasingly considering the implications of remote work policies on employee retention and productivity during mergers and acquisitions.

The Employment Law states in article 9.2.:

“Merging the establishment with another or transferring it by inheritance, bequest, donation, or sale – even by public auction or by assigning or leasing it or other such disposing actions shall not terminate the employment contracts of the existing employees. The successor employer shall be responsible jointly with the former employers for implementing all obligations arising from these contracts.”

However, the arbitrary termination or dissolution of employees is not tolerated by the Employment Law in any way. Terminating an employment contract is considered the exception rather than the rule

TAX CONSIDERATION IN M&A TRANSACTIONS

The taxation framework in Egypt is primarily governed by the Income Tax Law (Law No. 91 of 2005, as amended through 2024) and the Value Added Tax Law (Law No. 67 of 2016, as amended through 2023), along with various supplementary regulations and decrees.

M&A activity in Egypt is often driven by strategic economic considerations, such as market expansion and sectoral growth. However, a comprehensive assessment of the associated tax implications is critical to the success of such transactions. In this context, M&A activities are subject to the provisions of the Income Tax Law, as well as other relevant investment and corporate laws that may impact tax liabilities.

From the tax law perspective, M&A  transactions in Egypt can take different forms, including:

• Merging two or more legal entities into one
• Division of one legal entity into two or more legal entities
• Legal entity conversion from one legal form to another legal form

M&A activities must comply with tax laws, including those on capital gains, stamp duties, and VAT.

M&A transactions in Egypt are subject to various tax implications that investors should keep in mind to ensure compliance and optimize financial outcomes. The following are key tax-related factors that can impact M&A deals:

Capital Gains Tax

Profits from the sale or transfer of assets, or revaluation of the assets by the market price including shares or real estate, may be subject to capital gains tax, with rates depending on the asset type and transaction structure. However, the raised tax payment can be postponed for up to 3 years. In addition to certain full tax exemptions

Tax Exemptions and Incentives

Egypt’s Investment Law (No. 72 of 2017) offers tax incentives, such as exemptions, preferential rates, and deductions, for companies in specific sectors or investment zones, contingent on meeting government criteria.

Indirect Taxes (VAT, Stamp Duty, Registration Fees)

• Certain M&A deals may trigger indirect taxes like VAT, especially when assets or services are transferred, depending on the nature of the deal.
• Stamp Duty and Registration Fees.
• Transfers of property, shares, or other assets may incur stamp duty or registration fees, which vary by transaction type and should be considered in the deal structure.

Withholding Taxes and Cross-Border M&A Considerations

Cross-border M&A deals may be subject to withholding taxes on payments such as dividends, interest, or royalties, depending on Egypt’s tax treaties with the other country involved.

Double Taxation Agreements (DTAs)

Egypt has signed DTAs with over 60 countries, which reduce withholding tax rates on dividends, interest, and royalties, enhancing Egypt’s attractiveness to foreign investors.

Investors should conduct thorough tax due diligence and consult tax professionals to ensure compliance and optimize tax liabilities in M&A deals.

Recent Developments

Amendments to the VAT Law and Simplified Vendor Registration Regime

The Egyptian Minister of Finance recently issued Decree 24/2023, which amended the Executive Regulations of the VAT Law. The new decree and the amendments to the VAT Law provide details of the Simplified Vendor Registration Regime (this regime streamlines VAT compliance for non-resident and foreign businesses) to register for and comply with VAT requirements in Egypt.

This could involve streamlining registration procedures or lowering barriers for small businesses or foreign vendors to comply with VAT laws). and crack down on VAT evasion, thereby increasing tax revenues, and creating a level competitive environment for businesses in Egypt.

Updated to Transfer Pricing (TP) Regulations

To simplify compliance procedures and create a more conducive business environment, the Egyptian Tax Authority (ETA) recently introduced significant updates to transfer pricing (TP) regulations.

• Ministerial Resolution No. 52 of 2024 raises the materiality thresholdfor TP documentation and reduces the reporting burden for smaller enterprises and lower-value transactions.
• Transaction Pricing Explanatory Guide No. 78 of 2023 provides clearer guidelineson TP compliance obligations and ensures businesses align with international tax practices and avoid disputes with tax authorities.

The ETA’s initiatives including Ministerial Resolution No. 52 of 2024 and Explanatory Guide No. 78 of 2023, show Egypt’s commitment to improving tax transparency, reducing compliance burdens, and aligning with international tax standards. These measures contribute to a more competitive and business-friendly environment for both domestic and foreign investors.

COMPETITION LAW

Egypt’s competition law has undergone significant updates to strengthen regulatory oversight of anti-competitive practices in M&A transactions. The Goals of these reforms are to prevent monopolies, ensure fair market competition, and introduce stricter review processes for large transactions.

Amendments to the Competition Law

The Law on Protecting Competition and Preventing Monopolistic Practices, promulgated by Law No. 3 of 2005 (Competition Law), was amended by Law No. 175 of 2022. These amendments introduced the concept of economic concentration and established specific requirements for merger approvals. Key changes include:

• Mandatory Egyptian Competition Authority (ECA) approvalforall acquisitions exceeding a prescribed threshold.
• Clearly defined timlines for transaction approvals to improve process efficiency.
• Stronger oversightto prevent anti-competitive market dominance.

The ex-ante merger control regime was introduced and became effective on 1 June 2024. This initiative follows legislative amendments to Law No. 3 of 2005 (Egyptian Competition Law), pursuant to the provisions of Law No. 175 of 2022, and further amendments were made to the Executive Regulations issued by Prime Ministerial Decree No. 1120 of 2024.

Role of the Egyptian Competition Authority (ECA)

The Egyptian Competition Authority (ECA) will enforce prior control for mergers and acquisitions under amendments to the Competition Protection Law (Law No. 3 of 2005) and Law No. 175 of 2022.

The amendments grant the ECA new responsibilities, including assessing the impact of economic concentrations on market competition, with processes for turnover calculation, fees, documentation, and notification obligations.

The goal of prior control is to remove market entry barriers, foster competition, and attract local and foreign investments, supporting SMEs and enhancing consumer welfare. This system applies only to mergers and acquisitions between existing companies, not new investments.

Alongside global best practices, prior control is already in place in over 135 countries and is expected to improve Egypt’s global competitiveness. The ECA will approve concentrations if they demonstrate greater economic efficiency or if failing to proceed would lead to market exits.

The ECA has set up a dedicated department for economic concentrations, hired additional staff, and developed bilingual notification forms. The review process will take 30 working days for complete notifications, with over 95% are done within this time. Simplified procedures will apply to concentrations with minimal competition impact, reducing the review period to 20 working days.

The ECA has experience in prior control, particularly in healthcare, reviewing over 800 files in 2023-2024 in which the average time to review a files was 15 days.The ECA has also assessed mergers in the Common Market for Eastern and Southern Africa (COMESA).

KEY IMPACTS OF THE AMENDMENTS ON M&A TRANSACTIONS

Enhancing Competition and Transparency

The amendments promote a fair business environment by curbing monopolistic practices and encouraging new investors, start-ups, and SMEs through reduced barriers to entry.

Restructuring M&A Approval Procedures

Companies surpassing financial thresholds must notify the Egyptian Competition Authority (ECA) before completing deals, helping maintain market competition and prevent monopolization.

Encouraging Investment

Egypt’s reputation as a desirable investment location for both domestic and foreign investors is improved by the stronger regulatory environment, which also increases investor trust. Egypt’s economy is further stabilized by the recent USD 8 billion IMF loan deal, which attracts additional international investment.

Strengthening Penalties and Law Enforcement

Harsher penalties deter anti-competitive behavior and protect smaller investors and start-ups from exploitation by dominant market players.

Joint-Stock Companies

Additionally, all joint-stock companies (SAEs) must register their shares with the MCDR, which records shareholder data and share ownership.

M&A PROCESS: FROM PLANNING TO POST-MERGER INTEGRATION

Define Objectives and Identify Targets

Both buyer and seller must clarify their strategic goals (e.g., market expansion, product diversification, technology acquisition) to guide the M&A process. Buyers target companies that align with these goals, while in mergers, both parties evaluate compatibility in operations, culture, and long-term objectives. Due diligence follows, organizing internal teams and documentation to assess financial health, operations, and liabilities.

Engage Advisors

Financial advisors assist with valuation, deal structuring, and identifying targets, while legal advisors ensure compliance and contract drafting. Tax advisors focus on optimizing tax efficiency and minimizing liabilities.

Letter of Intent (LOI) or Term Sheet

The LOI or term sheet outlines the key terms of the deal, such as the purchase price, structure, payment terms, and timelines. It may be non-binding, but some clauses (e.g., exclusivity) can be binding. This document serves as the foundation for further negotiations.

Due Diligence

The buyer conducts a comprehensive review of the target company’s financial, operational, legal, and commercial standing. Documents such as financial statements, tax returns, contracts, and intellectual property records are reviewed.

Negotiation and Agreement Drafting

Once the due diligence phase is complete, both parties negotiate the final deal terms. This phase may involve:

• Escrow Agreement: Holding a portion of the purchase price in escrow to cover potential future claims or liabilities.
• Transaction Structure: Deciding whether the deal will be structured as a stock purchase, asset purchase, or merger.
• Defining Closing Conditions: Agree on conditions like regulatory approvals, shareholder consent, and financing.

Financing the Deal

M&As in Egypt are traditionally financed through third-party equity finance sources. These include personal and corporate guarantees that assure rights protection, transaction certainty, and credibility among the parties.

Common financing sources include:

• Escrow Agreements: A primary mechanism for transaction assurance.
• Letters of Guarantee: Less frequently used but still significant.
• Bank Loans: Traditional lending choices for financing mergers and acquisitions.
• Equity Financing: Private or public equity as a source of funds.
• Non-Traditional Mechanisms: Recently, venture capital and structured finance have gained traction as innovative approaches to funding M&As.

The Central Bank of Egypt (CBE), the Financial Regulatory Authority (FRA), and the Misr for Central Clearing, Depository, and Registry (MCDR) regulate the financing processes, prescribing prerequisites and limitations that vary by transaction.

Private Equity Activity

Private equity plays a key role, especially in technology and healthcare, targeting growth-stage companies with high expansion potential.

Credit Pricing and Terms

Credit conditions have tightened slightly, with lenders requiring more stringent security and financial covenants. However, financing remains accessible for well-structured deals, particularly those in high-growth sectors.

Escrow and Finalizing the Transaction

• Escrow Agreement: A portion of the purchase price is held in escrow to protect the buyer in case of unforeseen liabilities.
• Escrow Release: Once conditions are met, the escrowed funds are released to the seller.
• Escrow Account: A neutral third party (escrow agent) holds the funds until the agreed-upon conditions are met, such as the resolution of any legal disputes, claims, or breaches.
• Transaction Structure: The deal structure may involve stock purchases, asset purchases, or mergers, and each has its own tax and legal implications.
• Defining Closing Conditions: Conditions might include shareholder approvals, regulatory approvals, or obtaining financing.

Sale and Purchase Agreement (SPA)

• Purpose: The SPA is the core document that governs the transaction, establishing the terms and conditions under which the sale of the business takes place.
• Terms and Conditions: It covers the final price, payment methods, representations and warranties, covenants, and indemnities. The SPA also includes conditions precedent (e.g., approvals from regulatory bodies) and closing timelines.
• Significance: Once signed by both parties, the SPA binds them to the terms of the transctions.This agreement often includes provisions for dispute resolution, post-closing obligations, and adjustments to the purchase price based on post-closing financial performance or other factors.

CLOSING OF MERGER AND ACQUISITION TRANSACTIONS

M&A for Limited Liability Company (LLC)

The merger or acquisition of an LLC may require the company’s articles to be amended by a general meeting to reflect the structural changes, such as:

• Changes in Business Activities: When the transaction results in new activities or objectives.
• Capital or Share Adjustments: When there is an increase in capital or reallocation of shares among shareholders.
• Management Structure Changes: If the board composition or management structure changes post-transaction.

M&A for Joint-Stock Companies (SAEs)

The process of registering and transferring shares in joint-stock companies (SAE) involves several steps, with distinct roles for custodians and brokerage firms. Here’s a detailed explanation of the process:

Registering Shares with MCDR :

All joint-stock companies (SAE), whether their shares are listed on the stock exchange or not, their shares must be registered with MCDR.

MCDR records the data of shares, shareholders, and the number of shares owned by each shareholder.