In the context of mergers and acquisitions (M&A), most of the deals do not succeed due to the absence of interest or valuation differences, but rather under preparedness. A M&A readiness check is a systematic legal and operational examination performed prior to the entry of negotiations of such kind, with the aim of making sure that a firm will be at a condition of scrutiny by a potential acquirer or investor or a merger partner.
The preparedness reviews are essential in the UAE regulated and developing business environment in detecting legal, regulatory and structural loopholes that may slug or derail a transaction.
What Is an M&A Readiness Review?
M&A readiness review An M&A readiness review refers to a pre-deal examination of the preparedness of a business in terms of being in a merger, acquisition, or investment. A readiness review is usually done by the seller or target company in advance as compared to due diligence which is done by the buyer.
The review focuses on:
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Compliance with law and regulation.
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Corporate Governance and Corporate Structure.
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Operational readiness Contractual readiness
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Exposure and the past record of disputes.
The aim is to solve the problems before they arise and empower the company before they can get into contact with possible counterparty.
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The significance of Readiness Reviews in the UAE
The UAE businesses usually conduct business through:
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Free zone and mainland jurisdictions.
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Regulated industries
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International business organization.
These variables make the role of readiness review more significant because the approvals by regulatory bodies, compliance in ownership and licensing accuracy are highly examined during M&A deals.
A readiness review is beneficial as it assists companies:
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Anticipate buyer concerns
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Reduce transaction delays
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Enhance credibility of valuation.
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Reduce risks of renegotiation after the negotiation.
Major Legal Areas in an M&A Readiness Review
Corporate Documentation and Structure
The review examines:
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Corporation documents and record of constitutions.
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Beneficial ownership and shareholding.
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Adherence to foreign ownership policies.
Unaccounted corporate discrepancy can pose an obstacle of approval at a deal.
Licensing and Regulatory Compliance
A readiness review verifies:
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Legal trade licences and permits.
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Congruence of licensed operations and real operations.
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Regulatory specifications in the sector.
It is especially vital in regulated areas where the issue of licensing non-compliance can cancel transactions.
Contractual Readiness
Identified contracts are key commercial contracts, which are reviewed to identify:
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Change-of-control clauses
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Termination or consent conditions.
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Restrictions on assignment
Contractual issues can be taken care of in advance before there is any disruption when negotiations strike.
Working and labour Issues
Readiness reviews assess:
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The employment contracts and policies.
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Pending labour disputes
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Exposure to end-of-service benefit.
The material consideration of labour transactions is common in UAE transactions.
Exposure of Litigation and Compliance
The review identifies:
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Possible or current conflicts.
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Regulatory investigations
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Weaknesses in compliance such as AML risks.
This can be done early to prevent the scrutiny of buyers.
Correlation amid preparedness review and aim screenings
Although an M&A readiness review concentrates on the internal preparedness, it is complemented by target screening that is done by buyers to determine the potential targets of the acquisition.
The high level of readiness review will help to make sure that the target screening will not raise so many red flags.
Preparedness check and Deal Structuring
The results of a readiness review have a direct impact on the structuring of a transaction. Matters like compliance and contractual limitations or ownership issues might influence:
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Option of share purchase or asset purchase.
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Risk allocation mechanisms
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Conditions precedent
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Escrow or deferral payment plans.
At What Stage should M&A Readiness Review be undertaken?
An M&A preparedness audit must preferably be performed:
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Prior to getting to the potential buyers or investors.
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Giving an information memorandum beforehand
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Prior to getting into initial negotiations.
Early law scrutiny enables companies to deal with matters in advance as opposed to dealing with them after the event occurs.
M&A Preparedness Legal Review
Effective readiness review needs a legal proficiency in corporate law, regulatory and transactional practice. Legal counselors assist in risk recognition, prescribing remedial measures, and ensuring that the business is well fused with the demands of transacting.
At HHS Lawyers and Legal Consultants, we provide services on M&A preparation reviews to our clients. Mergers and Acquisitions consulting
FAQ’s
What is an M&A preparedness audit?
Who carries out an M&A preparedness audit?
Why should an M&A preparedness inspection matter in the UAE?
Tax Transparency: With the full implementation of Corporate Tax and e-Invoicing, buyers now demand 100% accurate tax trails.
Jurisdictional Nuance: Ensuring your license type (Mainland vs. Free Zone) matches your actual business activity to avoid “regulatory friction” during transfer.
UBO Compliance: Verifying that Ultimate Beneficial Ownership records are perfectly aligned with government portals to prevent deal delays.
What will be the scope of an M&A readiness review?
Financial & Tax: Reconciling VAT/CT filings and checking for “hidden” legacy liabilities.
Regulatory: Verifying ESR (Economic Substance) filings and AML (Anti-Money Laundering) compliance.
Operational: Assessing IT infrastructure and Cybersecurity resilience.
Human Capital: Reviewing end-of-service gratuity provisions and Emiratization quota compliance.
What is the difference between an M&A readiness review and due diligence?
Preparedness Review (Seller-led): Happens before marketing the business. Its goal is to remediate problems (e.g., updating a lapsed trade license or correcting a tax filing).
Due Diligence (Buyer-led): Happens after an LOI is signed. Its goal is to verify the seller’s claims and determine the final purchase price.
What benefits does an M&A readiness review provide to deal structuring?
When is an M&A readiness review to be done?
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Conclusion
An M&A readiness review is a business strategy that makes businesses successful in their transactions. The multi-layered nature of the legal and regulatory landscape of the UAE, coupled with early risk recognition, coupled with the clear target screening and proper structuring of deals will go a long way in enhancing the outcome of a transaction.
By planning and managing their operations, businesses will be able to conduct M&A transactions better, at low risk, and with more bargaining power.
