The most consequential failures in mergers and acquisitions rarely occur in the boardroom. They emerge months after closing when undiscovered contractual defects, regulatory gaps, or unresolved disputes surface. As the United Arab Emirates (“UAE”) consolidates its position as a premier destination for mergers and acquisition (“M&A”) transactions, the distinction between a seamless transaction and a protracted dispute increasingly hinges on the quality and depth of legal due diligence conducted before commitment.

With M&A deal values in the Gulf Co-operation Council region projected to grow substantially in 2026, institutional and family-backed acquirers across the region have demonstrably shifted their approach. Where financial metrics once dominated purchase decisions, legal and compliance certainty now operates as a parallel and often determinative pillar of valuation and deal structure.

Why Has Legal Due Diligence Has Become Non-Negotiable?

Legal due diligence addresses a straightforward but critical challenge: commercial value is substantially diminished if the target company harbors unreported contractual disputes, regulatory non-compliance, unresolved litigation, or defective ownership structures. Buyers increasingly recognize that attractive financial returns carry negligible meaning when encumbered by post-acquisition legal liabilities.

A comprehensive legal due diligence investigation answers the substantive questions upon which deal certainty rests:

• Are material contracts enforceable and free of hidden termination or change-of-control risks?

Ambiguities here can result in loss of key revenue streams or forced renegotiation at unfavorable terms.

• Does the target's ownership and governance records match current reality and meet all beneficial ownership reporting requirements?

Any discrepancies prevent the buyer from exercising proper control and expose them to regulatory penalties.

• Has the target satisfied all applicable regulatory requirements across its operating jurisdictions, and are licenses, permits, and sectoral approvals current and transferable?

This is particularly acute in regulated sectors such as finance, healthcare and education, where specific regulatory requirements apply.

• Does the target carry unquantified or contingent liabilities, pending litigation, outstanding violations, or undisclosed third-party commitments?

These become the buyer's responsibility upon closing and can materially erode realized value.

Modern M&A transactions involve layered obligations across regulators, commercial partners, financing stakeholders, and employees. Hence, legal due diligence functions as the structural foundation upon which valuation models and deal mechanics are anchored.

The UAE M&A Landscape in 2026: Increased Focus on Legal Due Diligence

Shareholder disputes, undisclosed litigation, expired or non-transferable licenses, and employment contract defects rank among the most common causes.

This experience has concentrated buyer focus on several critical areas:

• Verified ownership and corporate governance structures, with particular attention to beneficial ownership filings and shareholder authority documentation
• Comprehensive licensing and regulatory compliance mapping across all operating jurisdictions and industry-specific sectoral requirements
• Intellectual property ownership verification, ensuring clear title and absence of encumbrances
• Liability identification and quantification, including contingent obligations and intercompany exposures

The practical effect is that legal due diligence has moved from a compliance formality to an integral component of deal valuation and risk allocation. Buyers now explicitly tie purchase price adjustments, indemnification structures, and earn out mechanics to due diligence findings, recognizing that unidentified legal risks may ultimately reduce realized value.

How Legal Due Diligence Mitigates Post-Closing Disruption?

Post-acquisition disputes and operational complications are frequently traceable to inadequate or rushed legal due diligence. The risk is particularly acute in regulated sectors. Fintech, healthcare, education, trading, and real estate face regulatory authorities that have materially tightened compliance standards in the recent past. A single overlooked sectoral obligation can constrain operations, trigger enforcement action, or result in operational suspension pending remediation.

Thorough legal due diligence provides the following tangible benefits:

• Enables informed risk assessment. Buyers understand their actual legal exposure and can model its financial impact with precision. This eliminates post-closing surprises and acrimony between buyer and seller.
• Facilitates confident negotiation of protective covenants. When a buyer's legal risk profile is clearly documented, warranty and indemnification provisions can be precisely calibrated. Purchase price adjustments, escrow arrangements, and earn out structures become defensible rather than arbitrary.
• Creates operational readiness. Acquiring a business with known regulatory defects allows the buyer to develop a remediation roadmap before closing, accelerating the post-acquisition integration process and minimizing operational disruption.

Current Legal Due Diligence Expectations in UAE M&A

Conducting legal due diligence on UAE targets includes investigating the following:

• Contractual change-of-control provisions: Clarity on which material contracts require counterparty consent or may terminate upon change of ownership, and identification of any consents already secured
• Employment documentation: Verification that employment arrangements comply with labour regulations
• Sectoral regulatory compliance: Verification of licenses, permits, and approvals required by relevant authorities (for example, the Central Bank of UAE or the Telecommunications and Digital Government Regulatory Authority) and confirmation of transferability post-closing
• Trade license and free zone status: Verification of activity classifications, that all free zone specific requirements are in order, and that visa sponsorship obligations are discharged
• Intellectual property: Documentation confirming clear ownership, registration status, and absence of third-party claims or encumbrances pertaining to intellectual property
• Financial liabilities: Identification of all debt obligations, related-party commitments, guarantees, and contingent liabilities

These expectations show that buyers demand full legal compliance from sellers to get the best deal terms, as incomplete due diligence often leads to future disputes and lost value.

Common Legal Issues Identified During UAE M&A Due Diligence

The defects typically reflect operational gaps or inconsistent compliance practices within the target business. However, irrespective of intent, they create material post-acquisition risk that prudent buyers allocate during transaction structuring.

How MBG Corporate Services Supports Successful M&A Transactions?

MBG Corporate Services advises and guides our customers through every stage of the M&A transaction lifecycle, from initial due diligence to successful closing of the deal, with expertise in legal due diligence, contract review and drafting, and regulatory compliance assessment.

Whether you are an acquirer seeking to purchase with confidence or a seller positioning your business for optimal valuation, our due diligence practice provides the clarity required for efficient, well-informed transactions. We bring experience across diverse sectors ensuring that our analysis reflects both general corporate law principles and industry-specific regulatory nuances.