SECTION 1: Market overview
1.1 What have been the key trends in the M&A market in
your jurisdiction over the past 12 months and what have been
the most active sectors?
M&A transactions in the telecom and consumer goods
sectors have been particularly active in the market in the last
12 months. Furthermore, although not common in the Kuwait
market, warranty and indemnity insurance (further discussed in
5.7 below), has been seen in recent transactions.
1.2 What M&A deal flow has your market experienced and
how does this compare to previous years?
This information is not publicly available in Kuwait. That
being said, the pace of M&A activity in 2017 remained
broadly in line with 2016.
1.3 Is your market driven by private or public M&A
transactions, or both? What are the dynamics between the
The Kuwaiti market is primarily driven by private M&A
1.4 Describe the relative influence of strategic and
financial investors on the M&A environment in your
We are of the view that financial investors have a limited
impact on the M&A market in Kuwait.
SECTION 2: M&A structures
2.1 Please review some recent notable M&A transactions
in your market and outline any interesting aspects in their
structures and what they mean for the market.
ASAR assisted the shareholders of a Kuwaiti food delivery
start-up in connection with its sale in June 2017. This
transaction set numerous landmarks in terms of deal structuring
and its valuation, which will shape Kuwait's M&A market
going forward. More specifically, innovative structuring was
required to enable the acquisition of 100% of a Kuwaiti entity.
Furthermore, the sale terms were carefully structured to
satisfy the commercial requirements of the sellers and the
buyer incorporating two payment escrows, holdback arrangements
and detailed earn out arrangements. The valuation makes this
the highest value exit for a start up in Kuwait.
ASAR assisted a foreign purchaser in connection with the
acquisition of shares, the assignment of a shareholders' loan
and a participation interest in a joint-venture in connection
with a private company operating in the oil sector in Kuwait.
This transaction was of particular interest in light of the
complex legal and financial structure of the target and its
significant impact on the due diligence process (from a legal
and financial perspective).
ASAR assisted the buyer in connection with the acquisition
of shares and real estate assets relating to the operation of
several private English schools in Kuwait. This transaction is
of particular interest due the innovative structuring required
to enable the acquisition of real estate in light of foreign
2.2 What have been the most significant trends or factors
impacting deal structures?
See our comments with regards to the new special trades
regime further described in 3.1 below.
SECTION 3: Legislation and policy changes
3.1 Describe the key legislation and regulatory bodies that
govern M&A activity in your jurisdiction.
Law No. 7 of 2010 as amended (the CML) and its executive
bylaws (the CML Bylaws together with the CML, the CML Rules)
(particularly Book IX (Mergers and Acquisitions) of the CML
Bylaws), is the primary legislation governing public M&A in
Kuwait. The CML Rules apply to M&A transactions where there
is an acquisition or consolidation of control of:
- a Kuwait incorporated company listed on
Boursa Kuwait (formerly known as the Kuwait Stock
- a non-Kuwait incorporated company with a
secondary listing on Boursa Kuwait; or
- an entity licensed by the Kuwait Capital
Markets Authority (CMA) to conduct regulated activities
subject to the CMA's oversight (e.g. brokers, portfolio
managers, custodians, etc.).
The CMA is the primary regulator for public M&A activity
in Kuwait. The CML Rules provide a statutory framework for
public M&A in Kuwait where there is a takeover offer for
100% of the share capital of a company listed on Boursa Kuwait;
and a mandatory takeover offer which must be made to remaining
shareholders when the offeror acquires more than 30% of the
shares of a listed company.
|NB: Values may exclude
certain transactions, for example asset
3.2 Have there been any recent changes to regulations or
regulators that may impact M&A transactions or activity and
what impact do you expect them to have?
The CMA recently issued certain rules with respect to
special trade transactions (STT) in connection with listed
securities. Moreover, these rules have been adopted and
implemented by Boursa Kuwait (the local stock exchange in
Kuwait). As STTs only apply to listed securities, any such
transaction would also have to comply with the Capital Markets
Law and its executive regulations as well as the Boursa Kuwait
regulations. The Special Trade Rules (the Rules) were issued by
the CMA by way of resolution (the Resolution) to govern STTs in
Kuwait. The Resolution indicates that Boursa Kuwait should
issue and adopt further specific regulations in this regard in
the context of the Rules. However, with regard to such specific
regulations on executing the special trade, the
rules/regulations governing same are as set out in the Boursa
Kuwait form required to process the transaction (the Sale
Form). The Sale Form incorporates certain declarations by the
buyer, seller and their brokers. More specifically, the Rules
stipulate that STTs may only be concluded between one buyer and
one seller, provided the targeted shares are less than 5% of
the share capital of the target company. In the event a
transaction contemplates a transfer of shares is above the
abovementioned threshold, such transfer may be split in a
series of transactions.
One of the main benefits of the STT regime is that the
relevant sales will proceed directly between the buyer and the
seller without the need for a screen trade or a block trade
auction, which normally applies to the sale of 5% or more of
the shares of a listed company in one transaction. Special
trades should be conducted for cash consideration at a price
regulated by the Rules. More specifically, the Rules provide
that the price should not fall below or exceed the preceding
day's price by more than 20%.
One other important factor impacting deal structures is that
acquisition finance is generally possible in Kuwait given that
there are no financial assistance rules. However, because of
corporate benefit considerations, the parties to an M&A
transaction have to put in place various structures in order to
ensure the funds obtained through such financing are pushed
down the corporate structure.
3.3 Are there any rules, legislation or policy frameworks
under discussion that may impact M&A in your jurisdiction
in the near future?
We understand that amendments to the Competition Law and the
executive regulations thereto will be forthcoming, however, we
note that to date no such legislative amendments have been
promulgated and/or issued in the Kuwait Official Gazette.
SECTION 4: Market idiosyncrasies
4.1 Please describe any common mistakes or misconceptions
that exist about the M&A market in your jurisdiction.
Some of the mistakes or misconceptions with regards to the
Kuwaiti market include: poor disclosure processes because
sellers are sometimes inexperienced in the M&A processes,
and targets do not keep track of all the documents needed to be
disclosed to the buyers; and misconceptions about the
regulatory processes which are often more complicated than what
the parties expect. In addition, a common mistake made by
practitioners is to import legal structures and documentation
developed in other jurisdictions without a proper adaptation of
same to the peculiarities of the Kuwait legal system. This can
lead to complications in the execution phase of the transaction
and in the enforcement of rights arising under M&A
4.2 Are there frequently asked questions or often
overlooked areas from parties involved in an M&A
An area that is often overlooked and/or paid less attention
to is due diligence. In particular, appropriate translation of
due diligence findings into contractual protections, whether by
means of pre-closing remedial actions, associated variation of
commercial terms, special indemnities or other methods is
deficient. This often arises because the legal practitioners
that carry out the due diligence do not always lead the
negotiation of transaction documentation. Parties involved in
an M&A transaction also often overlook certain aspects of
the Kuwait competition law. Furthermore, the rendering of
M&A/investment advisory services with respect to securities
onshore of Kuwait is a regulated securities activity under the
CML Rules. As such, foreign services providers should be aware
of the restrictions applicable in connection with the rendering
of such services onshore of Kuwait.
4.3 What measures should be taken to best prepare for your
The best measures to prepare for the market idiosyncrasies
is to perform an adequate due diligence of the target, engage
well-experienced law firms with a proven M&A track record,
manage the expectations of the sellers (with respect to timing
and requirements specific to the jurisdiction) and encourage
parties to retain suitably qualified financial advisors.
SECTION 5(a): Public M&A
5.1 What are the key factors involved in obtaining control
of a public company in your jurisdiction?
The key factors are the following:
- Obtaining all relevant regulatory consents
from the applicable regulatory body, such as for example, the
CMA for licensed companies and/or (as applicable) the CBK
vis-à-vis financial institutions which are subject to
supervision by the CBK.
- Disclosure of the transaction as required
per the CML Rules.
- Abiding by the laws and regulations of
each sector. For example, pursuant to the CML Rules, for
companies listed on the exchange of Boursa Kuwait, a
mandatory takeover offer (MTO) must be launched by the bidder
once the bidder has come into possession of more than 30% of
the voting shares of a target company listed on the
5.2 What conditions are usually attached to a public
An MTO must not be subject to conditions that can only be
satisfied at the discretion, and in the subjective judgment, of
the bidder or the target company, or where their satisfaction
is within the control of the bidder or the target company. Only
voluntary takeover offers (VTO) may be subject to conditions
required by the bidder. However, in the case of an MTO takeover
offer, no conditions may be imposed by the bidder.
5.3 What are the current trends/market standards for break
fees in public M&A in your jurisdiction?
The terms of the agreement are generally left to the
discretion of the parties. There are no specific rules in
Kuwait dealing with break fees and parties are free to agree
specific arrangements to this effect. We are not aware of any
trends/market standards in this regard.
SECTION 5(b): Private M&A
5.4 What are the current trends with regard to
consideration mechanisms including the use of locked box
mechanisms, completion accounts, earn-outs and escrow?
Locked box mechanisms are common in Kuwait. Earn-outs and
escrow are very common in large transactions of KD30 million
($100 million) and above, whereas completion accounts are less
used in the Kuwaiti market.
5.5 What conditions are usually attached to a private
While a private takeover offer is permissible under the law,
there is no trend that has been established in the market given
that this is relatively new.
5.6 Is it common practice to provide for a foreign
governing law and/or jurisdiction in private M&A share
It is quite common to have acquisition documents governed by
foreign law (for example English law).
5.7 How common is warranty and indemnity insurance on
private M&A transactions?
Warranty and indemnity insurance, although not common, has
been seen in recent transactions.
5.8 Discuss the exit environment in your jurisdiction,
including the market for IPOs, trade sales and sales to
Exits in the market are usually structured as trade
SECTION 6: Outlook 2018
6.1 What are your predictions for the next 12 months in the
M&A market and how do you expect legal practice to
We anticipate a steady increase in public M&A activity
in Kuwait over the next 12 months. The outlook for public
M&A in Kuwait continues to benefit from the recent
promulgation of the relatively new CML Bylaws and Law No. 1 of
2016 (the Companies Law).
Partner, ASAR-Al Ruwayeh &
T: +965 2292 2700
F: +962 22400064
John Cunha is a partner at ASAR and has been with
the firm since April 2006.
He practices in the areas of banking and finance,
capital markets and mergers and acquisitions. Cunha
holds a law degree awarded by the University of the
Free State, South Africa in 1999. In 2002 he was also
awarded a master of business administration degree
(MBA) from the University of the Free State, South
Africa (in collaboration with De Paul University in
Chicago, USA). He also holds a master of laws degree
(international trade law) (LLM) awarded by the
University of Stellenbosch, South Africa. Cunha was
admitted to the South African bar in 2000 and admitted
as a solicitor of the Senior Courts of England and
Wales in 2007. Cunha's practice languages are English,
Afrikaans and Portuguese.
Senior associate, ASAR-Al Ruwayeh &
T: +965 2292 2700
F: +962 22400064
Laurent V Levac is a senior associate at ASAR and
has been with the firm since August 2014. Prior to
joining ASAR, Levac worked for international law firms
with postings in France, the United Kingdom, the
Netherlands and Canada. Levac currently practices in
the areas of mergers and acquisitions, private equity,
corporate law, banking and finance and private clients.
He holds a bachelor's degree in civil law (LLL) and
bachelor's degree in common law (LLB) awarded by the
University of Ottawa, Ontario, Canada, respectively in
2002 and 2003. He also holds a master's degree in
American common law (LLM), awarded by Cornell Law
School, New York, USA in 2005. Levac was admitted to
the Quebec Bar (Canada) in 2005 and the Law Society of
England & Wales in 2010. His practice languages are
English and French.