Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause

International transfers without safeguards

LGPD Impact (Brazil): Arts. 33–35
GDPR Parallel (Europe): Arts. 44–50
Practical Recommendation: Verify SCCs (2021/2023) or adequacy status

Real Cases Illustrating the Scale of Risk

• Telepsychology platforms investigated for using automated triage without informed consent or AI transparency.
• ANPD actions against genomics startups due to cross-border transfers without SCCs or DPIAs.
• Outsourced cloud hosting increasing irregular data transfer risks.

Until Brazil receives an EU adequacy decision, SCCs and BCRs remain mandatory for compliant transfers.

Essential Due Diligence Deliverables

A robust data-protection review is now essential in healthtech M&A. Key deliverables include:

• LGPD ↔ GDPR gap analysis
• ROPA and DPIA review
• Sub-processor contract verification
• Mapping of all international transfers
• Privacy-specific warranties and indemnities
• Escrow or holdback for regulatory risk exposure

Conclusion

Data protection is no longer secondary in healthtech M&A—especially when neurodata is involved. With ANPD scrutinizing neurotechnologies and GDPR obligations extending across borders, investors must prioritize structured due diligence and strong contractual safeguards.

FAQ

Is neurodata considered sensitive personal data under the LGPD?

Yes—ANPD treats neurodata as highly sensitive because it reveals cognitive, emotional, and health patterns.

Does GDPR apply to Brazilian companies with no EU presence?

Yes, via Article 3(2), whenever EU data subjects’ information is processed.

Are SCCs still required for Brazil–EU transfers?

Yes, until Brazil receives an EU adequacy decision.

What are the top investor red flags?

Missing DPIAs, unclear legal bases, opaque algorithms, and irregular transfers.

A dedicated notary account in Brazil is a legal mechanism that brings greater security, transparency, and reliability to financial transactions. Regulated under Law 8.935/1994 and Provision No. 197/2025, this service allows notaries to receive, manage, and release funds only after contractual conditions have been fulfilled. By ensuring segregation of assets, traceability, and impartial oversight, dedicated notary accounts provide an effective escrow-like solution for real estate deals, mergers and acquisitions, import/export operations, high-value asset purchases, and complex commercial contracts. This tool not only reduces legal risks and potential disputes but also strengthens trust between parties by guaranteeing that payments are safeguarded until obligations are met.

The legal basis can be found in Law 8.935/1994, § 1 of art. 7-A, which allows notaries to receive, deposit, and manage amounts related to legal transactions, with transactions subject to objectively verifiable facts/conditions. Provision No. 197, dated June 13, 2025, regulates, at the national level, the service of notarial accounts linked to Notary Public Offices.

Practical applications: among others, in the following transactions:

• Real estate: guarantee that the down payment and settlement amounts will be secured in a specific account. This mitigates the risk of misappropriation of funds and ensures that the money will be released only after all contractual conditions have been met.
• M&A: the linked notarial account creates a standardized escrow mechanism for the payment of price/holdbacks/earn-outs and conditional obligations.
• Purchase and Sale of High-Value Movable Property: the linked account can be used to guarantee payment. The buyer deposits the amount and the seller knows that the money is safe, being released only after the transfer of ownership and delivery of the goods.
• Import and Export: the transaction amount can be deposited with the notary and released to the exporter only after confirmation of delivery of the goods in the destination country, for example.
• Guarantee of Obligations: In any contract that provides for the payment of a sum of money as a guarantee, the notary account can be used to provide greater security to the parties.
• Supply, EPC/turnkey, and construction contracts: performance retentions, milestone acceptance (commissioning, as-built, issuance of ART/CREA), and payment against formal acceptance.
• Contractual joint ventures and commercial partnerships: advances conditional on licenses, authorizations, or competitive approval, where applicable.

Reduction of Legal Risks: The use of linked accounts reduces the chances of litigation related to lack of clarity about the origin and destination of funds. Companies can clearly demonstrate that payments were made and held by an impartial and secure institution.

Operational structure: limited to banking entities affiliated with the CNB, which must ensure the segregation of assets, traceability through audit trails, and proof of all transactions. The authorization of the delegate requires prior accreditation and electronic registration of the essential details of the transaction and its conditions in the CNB system, with access restricted to the parties and the notary.

Specific Purpose: amounts received as payment, guarantee, or advance payment as a result of notarial acts must be deposited in a bank account linked to the specific act and may only be moved for the purpose for which they are intended.

Transparency and Traceability: With the linked notarial account, it is possible to clearly track the financial flow of each transaction, which increases transparency for all parties and for supervisory bodies.

Verification of conditions and release. Once the objective conditions have been met, the notary authorizes the transfer to the recipients and files the proof of verification. In the event of a dispute between the parties, the notary suspends any movement, draws up a notarial deed, and advises on a consensual or judicial solution, without deciding on the effectiveness/termination of the transaction; if the transaction is frustrated and no solution is found, the procedure is terminated and the amounts are returned to the depositor, in accordance with the agreed clauses.

Confidentiality and access. In transactions with a confidentiality clause, the notary public maintains confidentiality and does not issue certificates regarding the content of the transaction; documents are accessible only for correctional purposes or by court order.

Remuneration and costs. The notary’s remuneration for the notarial account service is paid by the financial institution under the terms of the agreement, and the transfer of additional costs to the user is prohibited, without prejudice to fees for any related notarial acts.

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.

There were hardly even a few businesses worldwide not affected by the corona pandemic. As lockdown measures were expanding from March 2020, dozens of visitor-dependent (including retail, public transportation, HoReCa, leisure, entertainment & sport) companies’ value dropped astonishingly. This immediately resulted in numerous RFPs coming in and out NPL funds and distress investors being ready as never to pluck those companies ripe enough.

Well, at least that is how the things should have been.

A general picture of M&A demand remains with no great changes. According to the recent DataSite EMEA report first 2021 quarter shown 40 % deal value increase and 14 percent deal volume growth. Some sceptic experts already highlighted that Q1 references are insufficient – as Q1 2020 was painted in an unseen uncertainty and hard-model governmental interference whilst Q1 2021 came in much more predictable conditions with vaccination campaigns being successful and more lockdowns lightened.

The 2020 picture for the distressed part of the global (and particularly EMEA) part of M&A market is quite the same. With hundreds of companies still receiving governmental support and financial institutions still having a wide liquidity, the 2020 data from Bloomberg reports show no Big Bang in distress deals (either arising from pre-pack agreements between debtors and creditors or from formal insolvency processes), at least if compared with 2007-8 recession years.

Nevertheless Bloomberg themselves recognize that 2021 market might become red-hot. Whether this prognosis will materialize soon – here are four basic tips to hold in mind when thinking on insolvency-sed distress M&A deal on either – buyer or seller side:

1. asset or going-concern purchase. A key business decision is understanding of whether a target business is viable enough and fits in the buyer’s existing\planned portfolio to be bought as a going-concern company. Should there be no certainty – a rule of thumb with almost always be to stick with the asset deal being more secured and the target itself much easier to allocate.
   On the other hand, for a manufacturing target license and related IP rights holding might constitute a large part of the business’ value – without which the desired asset appears to be a no-hand pot.

2. watch for exclusivity – as asset-based distressed purchase might lack one because of the procedural obligation of going through bidding process.
3. beware of easy ways. With so-called reverse vesting orders and free-and-clean sales an SP process might look very comfortable for a buyer eager to obtaining the target clean of any burdens (liens, mortgages, tax liabilities). Might look – but rarely be such within FSU and a part of CEE countries where a big chance of facing clawback action exists, especially with a huge state (tax\duty) interest at stake.
4. do post-deal homework. When purchasing a going concern company it is for the newly-appointed management to be concerned the most: in a number of jurisdictions they might be boomeranged with management-liability claims resulting from previous management\shareholders cadence.
5. have an insurance company over the seller’s back. In case any post-closing tails appear, this will give a substantial level of calmness for both sides relying on the insurance to cover a part of the purchase price or post-deal liabilities.

With the post-pandemic distress M&A yet to come and investors being ready as never, these rules will certainly be of use. As S&P 500 non-financials, in late 2020 corporate balance sheets reflected more than $2 trillion of cash – guess if there are funds for making your deal as well? Just remember: there is no one-size-fits-all approach in doing the distress deal and there always is a place for bespoke solutions given by true professionals.

In 2019 the Private Equity and Venture Capital players have invested Euro 7,223 million in 370 transactions in the Italian Market, 26% less than 2018; these are the outcomes released on March 24^th by AIFI (Italian Association of Private Equity, Venture Capital e Private Debt).

In this slowing down scenario the spreading of Covid-19 is impacting Private Equity and Venture Capital transactions currently in progress, thus raising implications and alerts that will considerably affect both further capital investments and the legal approach to investments themselves.

Companies spanning a wide range of industries are concerned by Covid-19 health emergency, with diverse impacts on businesses depending on the industry. In this scenario, product companies, direct-to-consumer companies, and retail-oriented businesses appear to be more affected than service, digital, and hi-tech companies. Firms and investors will both need to batten down the hatches, as to minimize the effects of the economic contraction on the on-going investment transactions. In this scenario, investors hypothetically backing off from funding processes represent an issue of paramount concern for start-ups, as these companies are targeted by for VC and PE investments. In that event, the extent of the risk would be dependent upon the investment agreements and share purchase agreements (SPAs) entered into and the term sheets approved by the parties.

MAC/MAE clauses

The right of investors to withdrawal (way out) from a transaction is generally secured by the so-called MAC or MAE clauses – respectively, material adverse change clause or material adverse effect. These clauses, as the case may be and in the event of unforeseeable circumstances, upon the subscription of the agreements, which significantly impact the business or particular variables of the investment, allow investors to decide not to proceed to closing, not to proceed to the subscription and the payment of the share capital increase, when previously resolved, to modify/renegotiate the enterprise value, or to split the proposed investment/acquisition into multiple tranches.

These estimates, in terms of type and potential methods of application of the clauses, usually depend on a number of factors, including the governing law for the agreements – if other than Italian – with this circumstance possibly applying in the case of foreign investors imposing the existing law in their jurisdiction, as the result of their position in the negotiation.

When the enforcement of MAC/MAE clauses leads to the modification/renegotiation of the enterprise value – that is to be lowered – it is advisable to provide for specific contract terms covering calculating mechanisms allowing for smoothly redefining the start-up valuation in the venture capital deals, with the purpose of avoiding any gridlocks that would require further involvement of experts or arbitrators.

In the absence of MAC/MAE clauses and in the case of agreements governed by the Italian law, the Civil Code provides for a contractual clause called ‘supervenient burdensomeness’ (eccessiva onerosità sopravvenuta) of a specific performance (i.e. the investment), with the consequent right for the party whose performance has become excessively burdensome to terminate the contract or to make changes to the contract, with a view to fair and balanced conditions – this solution however implies an inherent degree of complexity and cannot be instantly implemented. In case of agreements governed by foreign laws, it shall be checked whether or not the applicable provisions allow the investor to exit the transaction.

Interim Period clauses

MAC/MAE are generally negotiated when the time expected to closing is medium or long. Similarly, time factors underpin the concept of the Interim Period clauses regulating the business operation in the period between signing and closing, by re-shaping the company’s ordinary scope of business, i.e. introducing maximum expenditure thresholds and providing for the prohibition to execute a variety of transactions, such as capital-related transactions, except when the investors, which shall be entitled to remove these restrictions from time to time, agree otherwise.

It is recommended to ascertain that the Interim Period clauses provide for a possibility to derogate from these restrictions, following prior authorization from the investors, and that said clauses do not require, where this possibility is lacking, for an explicit modification to the provision because of the occurrence of any operational need due to the Covid-19 emergency.

Conditions for closing

The Government actions providing for measures to contain coronavirus have caused several slowdowns that may impact on the facts or events that are considered as preliminary conditions which, when occurring, allow to proceed to closing. Types of such conditions range from authorisations to public entities (i.e. IPs jointly owned with a university), to the achievement of turnover objectives or the completion of precise milestones, that may be negatively affected by the present standstill of companies and bodies. Where these conditions were in fact jeopardised by the events triggered by the Covid-19 outbreak, this would pose important challenges to closing, except where expressly provided that the investor can renounce, with consent to proceed to the investment in all cases. This is without prejudice to the possibility of renegotiating the conditions, in agreement with all the parties.

Future investments: best practice

Covid-19 virus related emergency calls for a change in the best practice of Private Equity and Venture Capital transactions: these should carry out detailed Due diligences on aspects which so far have been under-examined.

This is particularly true for insurance policies covering cases of business interruption resulting from extraordinary and unpredictable events; health insurance plans for employees; risk management procedures in supply chain contracts, especially with foreign counterparts; procedures for smart working and relevant GDPR compliance issues in case of targeted companies based in EU and UK; contingency plans, workplace safety, also in connection with the protocols that ensure ad-hoc policies for in-house work.

Investment protection should therefore also involve MAC/MAE clauses and relevant price adjustment mechanisms, including for the negotiation of contract-related warranties (representation & warranties). A special focus shall be given now, with a different approach, to the companies’ ability to tackle and minimize the risks that may arise from unpredictable events of the same scope as Covid-19, which is now affecting privacy systems, the workforce, the management of supply chain contracts, and the creditworthiness of financing agreements.

This emergency will lead investors to value the investments with even greater attention to information, other than financial ones, about targeted companies.

Indeed, it is mandatory today to gain overview on the resilience of businesses, in terms of structure and capability, when these are challenged by the exogenous variables of the market on the one side, and by the endogenous variables on the other side – to be now understood as part of the global economy.

There is however good news: Venture Capital and Private Equity, like any other ecosystem, will have its own response capacity and manage to gain momentum, as it happened in 2019 when Italy witnessed an unprecedented increase in investments. The relevant stakeholders are already developing coping strategies. Transactions currently in progress are not halted – though slowed down. Indeed, the quarantine does not preclude negotiations or shareholders’ meetings, which are held remotely or by videoconference. This also helps dispel the notion that meetings can only be conducted by getting the parties concerned round the same table.

The author of this post is Milena Prisco.

The COVID-19 pandemic’s dramatic disruption of the legal and business landscape has included a steep drop in overall M&A activity in Q1 2020.  Much of this decrease has been due to decreased target valuations, tighter access by buyers to liquidity, and perhaps above all underlying uncertainty as to the crisis’s duration.

For pending transactions, whether the buyer can walk away from the deal (or seek a purchase price reduction) by invoking a material adverse change (MAC) or material adverse effect (MAE) clause – or another clause in the purchase agreement – due to COVID-19 has become a question of increasing relevance.  MAC/MAE clauses typically allow a buyer to terminate an acquisition agreement if a MAC or MAE occurs between signing and closing.

Actual litigated cases in this area have been few and far between, as under longstanding Delaware case law[1], buyer has the burden of proving MAC or MAE, irrespective of who initiates the lawsuit.  And the standard of proof is high – a buyer must show that the effects of the intervening event are sufficiently large and long lasting as compared to an equivalent period of the prior year.  A short-term or immaterial deviation will not suffice.  In fact, Delaware courts have only once found a MAC, in the December 2018 case Akorn, Inc. v. Fresenius Kabi AG.

And yet, since the onset of the COVID-19 pandemic, numerous widely reported COVID-19 related M&A litigations have been initiated with the Delaware Court of Chancery.  These include:

• Bed, Bath & Beyond suing 1-800-Flowers (Del. Ch. April 1, 2020) to complete its acquisition of Perosnalizationmall.com (purchaser sought an extension in closing, without citing specifically the contractual basis for the request);
• Level 4 Yoga, franchisee of CorePower Yoga, suing CorePower Yoga (Del. Ch. Apr 2, 2020) to compel CorePower Yoga to purchase of Level 4 Yoga studios (after CorePower Yoga took the position that studio closings resulting from COVID-19 stay-at-home orders violated the ordinary course covenant);
• Oberman, Tivoli & Pickert suing Cast & Crew (Del. Ch. Apr 6, 2020), an industry competitor, to complete its purchase of Oberman’s subsidiary (Cast & Crew maintained it was not obligated to close based on alleged insufficiencies in financial data provided in diligence);
• SP VS Buyer LP v. L Brands, Inc. (Del. Ch. Apr 22, 2020), in which buyer sought a declaratory judgment in its favor on termination); and
• L Brands, Inc. v. SP VS Buyer L.P., Sycamore Partners III, L.P., and Sycamore Partners III-A, L.P (Del. Ch. Apr 23), in which seller instead seeks declaratory judgment in its favor on buyer obligation to close.

Such cases, typically signed up at an early stage of the pandemic, are likely to increase.  Delaware M&A-MAC-related jurisprudence suggests that buyers seeking to cite MAC in asserting their positions should expect an uphill fight, given buyer’s high burden of proof.  Indeed, Delaware courts’ sole finding of a MAC in Akorn was based on rather extreme facts: target’s (Akorn’s) business deteriorated significantly (40% and 20% drops in profit and equity value, respectively), measured over a full year.  And quite material to the Court’s decision was the likely devastating effect on Akorn’s business resulting from Akorn’s deceptive conduct vis-à-vis the FDA.

By contrast, cases before and after Akorn, courts have not found a MAC/MAE, including in the 2019 case Channel Medsystems, Inc. v. Bos. Sci. Corp.  There, Boston Scientific Corporation (BSC) agreed to purchase Channel Medsystems, Inc., an early stage medical device company.  The sale was conditioned on Channel receiving FDA approval for its sole product, Cerene. In late December 2017, Channel discovered that falsified information from reports by its Vice President of Quality (as part of a scheme to steal over $2 million from Channel) was included in Channel’s FDA submissions.  BSC terminated the merger agreement in May 2018, asserting that Channel’s false representations and warranties constituted a MAC.

The court disagreed.  While Channel and Akron both involved a fraud element, Chanel successfully resubmitted its FDA application, such that the fraudulent behavior – the court found – would not cause the FDA to reject the Cerene device.  BSC also failed to show sufficiently large or long-lasting effects on Channel’s financial position.  Channel thus reaffirmed the high bar under pre-Akron Delaware jurisprudence for courts to find a MAC/MAE (See e.g. In re IBP, Inc. S’holders Litig., 789 A.2d 14 (Del. Ch. 2001); Frontier Oil Corp. v. Holly Corp., 2005 WL 1039027 (Del. Ch. Apr. 29, 2005); Hexion Specialty Chemicals v. Huntsman Corp., 965 A.2d 715 (Del. Ch. 2008)).

Applied to COVID-19, buyers may have challenges in invoking MAC/MAE clauses under their purchase agreements.

First, it may simply be premature at this juncture for a buyer to show the type of longer-term effects that have been required under Delaware jurisprudence.  The long-term effects of COVID-19 itself are unclear.  Of course, as weeks turn into months and longer, this may change.

A second challenge is certain carve-outs typically included in MAC/MAE clauses.  Notably, it is typical for these clauses to include exceptions for general economic and financial conditions generally affecting a target’s industry, unless a buyer can demonstrate that they have disproportionately affected the target.

A buyer may be able to point to other clauses in a purchase agreement in seeking to walk away from the deal.  Of note is the ordinary course covenant that applies to the period between signing and closing.  By definition, most targets are unable to carry out business during the COVID-19 crisis consistent with past practice.  It is unclear whether courts will allow for a literal reading of these clauses, or interpret them taking into account the broader risk allocation regime as evidenced by the MAC or MAE clause in the agreement, and in doing so reject a buyer’s position.

For unsigned deals, there may be some early lessons for practitioners as they prepare draft purchase agreements.  On buyer walk-away rights, buyers will want to ensure that the MAE/MAC definition includes express reference to “pandemics” and “epidemics”, if not to “COVID-19” itself.  Conversely, Sellers may wish to seek to loosen ordinary course covenant language, such as by including express exceptions for actions required by the MAC or MAE and otherwise ensure that they comply with all obligations under their control.  Buyers will also want to pay close attention to how COVID-19 affects other aspects of the purchase agreement, including seeking more robust representations and warranties on the impact of COVID-19 on the target’s business.

[1] Although the discussion of this based Delaware law, caselaw in other U.S. jurisdictions often is consistent Delaware.  

Les fusions-acquisitions internationales sont des mécanismes complexes, préparés avec soin. Les avocats gèrent les risques, anticipent les contraintes réglementaires et rédigent des documents capables de résister à l’examen de plusieurs juridictions. Sur le plan juridique, bon nombre de ces transactions sont irréprochables.

Et pourtant, un nombre surprenant d’entre elles peinent à générer la valeur attendue.

Lorsque cela se produit, le problème ne se trouve pas dans la documentation. Il se situe du côté humain : les parties concernées croient-elles réellement en cette transaction ?

La confiance commence par la communication. Si les personnes ne comprennent pas la transaction, les documents ne suffiront pas à la sauver.

Ce que les avocats voient, et ce que les autres ressentent

Pour les juristes, l’opération est avant tout une question de maîtrise du risque. Chaque mot est pesé, chaque risque anticipé.

Pour les autres publics, la réalité est toute autre.

Les employés apprennent qu’un acteur étranger rachète leur entreprise et comblent eux-mêmes les zones d’ombre. Les clients se demandent si les priorités vont changer. Les autorités de réglementation cherchent des précédents. Les journalistes traquent un angle local.

Ces publics ne lisent pas les actes juridiques. Ils réagissent à des bribes d’information, à des conversations informelles et à la couverture médiatique.

Cet écart entre rigueur juridique et perception humaine fragilise souvent l’opération.

Le silence est rarement neutre

Entre l’annonce et la clôture, la prudence vire souvent au silence.

Les raisons sont compréhensibles : multiplicité des régimes de divulgation, contraintes liées au droit de la concurrence, règles d’emploi variables selon les pays. Personne ne souhaite dire la mauvaise chose, au mauvais moment, au mauvais endroit.

Mais le silence ne crée jamais la stabilité.

Sans information fiable, chacun bâtit son propre récit. Ces récits circulent vite, dedans comme dehors. Une fois ancrés, ils deviennent difficiles à corriger.

Une seule transaction. De multiples interprétations

Les transactions transfrontalières ne reposent pas sur des référents implicites communs.

Un message bien reçu dans un pays peut être perçu comme arrogant dans un autre. Une annonce jugée prudente et responsable sur un marché peut paraître évasive ailleurs. Les attentes en matière de transparence et de leadership varient bien plus qu’on ne l’imagine.

C’est pourquoi un message international unique est souvent inefficace.

La logique commerciale doit être cohérente, mais la confiance se construit localement. Cela suppose de comprendre, dans chaque marché, les voix d’influence et les préoccupations réelles des parties prenantes.

Quand l’incertitude s’installe, chacun se replie. Les rôles se figent, les décisions se retardent, l’énergie passe de la construction à la défense.

Résultat : désengagement, résistance et retards.

Les employés se positionnent plus tôt qu’on ne le croit

Pour les employés, une fusion-acquisition devient personnelle avant d’être stratégique.

Ils veulent savoir comment les décisions se prendront, si leur expertise sera reconnue et ce que cela signifie pour leur avenir. Ils n’attendent pas des certitudes, mais des réponses franches.

Des messages flous ou trop rassurants créent plus d’anxiété qu’une reconnaissance honnête des zones d’incertitude.

Les gestionnaires se trouvent au cœur de cette dynamique. Ils bénéficient souvent d’une plus grande crédibilité que les communications institutionnelles, mais manquent parfois d’outils pour expliquer concrètement l’opération. Sans clarté, l’incertitude se diffuse rapidement et s’enracine.

Ce n’est pas le changement qui crée le désengagement, mais la crainte de perdre son rôle, son influence, son identité ou sa stabilité.

L’attention externe change la donne

Les transactions internationales attirent une attention publique et politique bien plus forte que les opérations domestiques.

Propriété étrangère, emploi, intérêt national : autant de facteurs qui influencent les autorités.

Les attentes des médias varient selon les pays.

L’incertitude interne finit par se voir à l’extérieur. Clients et partenaires la détectent parfois avant la direction.

Pourquoi cela est important pour les conseillers juridiques

Pour les avocats qui accompagnent des opérations de fusion et acquisition transfrontalières, la communication ne se limite pas à des considérations d’image de marque. Elle fait partie intégrante de l’exécution de la transaction.

Une communication mal séquencée complique le dialogue avec les autorités, fragilise la crédibilité et rend l’intégration inutilement complexe.

À l’inverse, une communication bien conçue soutient la stratégie juridique, aligne ce qui peut être dit avec la perception locale et réduit les tensions.

Un test simple: si les parties prenantes ne sont pas en mesure d’expliquer, dans leurs propres mots, pourquoi l’opération est logique, la communication n’a pas porté ses fruits.

Les échecs ne viennent pas du manque de compétence juridique, mais d’une intégration tardive de la dimension humaine.

Pour les avocats, anticiper le risque communicationnel dès le départ peut faire la différence entre une transaction finalisée sur le plan juridique et une transaction réellement réussie.

Summary
This article explores the ANPD’s 2025 Tech Radar on neurotechnologies and how it reshapes compliance risks for Brazilian healthtechs—especially in M&A contexts involving GDPR exposure. It outlines key regulatory concerns, the GDPR’s extraterritorial impact, major due-diligence red flags, and the essential deliverables investors should require.

Introduction

Brazil’s latest ANPD Tech Radar brings neurotechnologies to the forefront of data-protection compliance, exposing significant risks for healthtech companies and investors. With GDPR’s extraterritorial reach, sensitive data processing, opaque AI, and cross-border transfers, data governance has become a critical M&A due-diligence factor requiring structured reviews and robust contractual safeguards.

Key Compliance Risks Shaping Brazilian Healthtech M&A

Brazil’s Data Protection Authority (ANPD) released its 4th Tech Radar in June 2025, focusing entirely on neurotechnologies—marking the first time the regulator targeted this field so directly. The report explores brain-computer interfaces, advanced wearables, AI-driven cognitive therapies, and predictive diagnostics, highlighting risks far beyond traditional health data processing.

For investors and lawyers working M&A deals in Brazil’s healthtech sector, this Radar signals that data protection is no longer a secondary compliance issue—it is now a major source of legal, reputational, and operational risk.

GDPR’s Extraterritorial Relevance

Many Brazilian healthtechs handle personal data from foreign individuals, particularly Europeans—through expats, medical tourists, cross-border clinical trials, or partnerships with EU-based vendors. When this occurs, GDPR Article 3(2) extends jurisdiction to the Brazilian company, even without any EU establishment.

Main Risks Identified by ANPD (Tech Radar #4)

• Inferring health data without explicit consent
  Example: wearables identifying depression through sleep or stress patterns without informing users.
• Lack of transparency in predictive algorithms
  Black-box AI models making clinical decisions without accessible documentation.
• Cybersecurity vulnerabilities in connected devices
  Neural implants or neurostimulators vulnerable to hacking, with potentially physical consequences.
• Automated processing that impacts human dignity
  Behavioral profiling influencing insurance eligibility, discrimination, or patient autonomy in therapy environments.

GDPR Article 22 prohibits automated decision-making with significant effects unless strict safeguards are implemented—making this a critical risk during due diligence.

Most Common Red Flags in Brazilian Healthtech Due Diligence

No clear legal basis for sensitive data (health, genetic, biometric)

LGPD Impact (Brazil): Breach of LGPD Art. 11
GDPR Parallel (Europe): Art. 9 (special categories)
Practical Recommendation: Require full data-mapping and warranties

Generic or “click-to-accept” consents

LGPD Impact (Brazil): Invalid consent (Art. 7 & 11)
GDPR Parallel (Europe): Art. 6 + 7
Practical Recommendation: Ensure all consents are granular, specific, and revocable

Third-party sharing without processor agreements

LGPD Impact (Brazil): Breach of LGPD Art. 28 & 33
GDPR Parallel (Europe): Art. 28
Practical Recommendation: Verify existence and adequacy of all DPAs

Missing or incomplete ROPA

LGPD Impact (Brazil): Serious regulatory violation
GDPR Parallel (Europe): Art. 30
Practical Recommendation: Make ROPA delivery a closing condition

Non-existent or conflicted DPO

LGPD Impact (Brazil): Non-compliance with ANPD Resolution CD nº 2
GDPR Parallel (Europe): Art. 37–39
Practical Recommendation: Require interview + independence confirmation

No DPIA for high-risk products

LGPD Impact (Brazil): Mandatory (ANPD Res. 15/2023)
GDPR Parallel (Europe): Art. 35
Practical Recommendation: Include pre-closing DPIA audit clause