Mergers & Acquisitions Strategies in Egypt: Legal Framework and Best Practices

Foreign and domestic investors view Egypt as a strategic hub for M&A activity, given its large economy and growth potential. The legal system is civil-law based, and M&A transactions are governed by multiple statutes. Key laws include the Companies Law No.159 of 1981 (as amended), which sets out rules for corporate reorganizations, and the Capital Markets Law No.95 of 1992, which regulates share transactions and public offerings. Listed companies must also comply with the Egyptian Exchange (EGX) Listing Rules, and foreign investors benefit from Investment Law No.72 of 2017, which provides incentives and equal treatment to foreign capital. In practice, a proposed M&A may trigger multiple regulatory regimes, including competition law and sectoral rules. For example, the Competition Law (Law No.3/2005) now requires pre-closing clearance if turnover thresholds are met, and new 2024 guidelines clarify that even joint ventures can be notifiable if they effectively create a “full-function” independent entity.

The Egyptian Financial Regulatory Authority (FRA) plays a central role in most M&A deals, especially those involving securities or financial institutions. As the principal securities regulator, the FRA supervises public tender offers and share transfers. In particular, any acquisition of listed or unlisted joint-stock company shares must be executed through a FRA-licensed broker on the EGX. Transactions above certain sizes (EGP 20 million) require EGX Pricing Committee approval, and the FRA must be notified of such deals. In regulated industries, the FRA’s clearance may be needed: for example, a buyer of 10% or more of a non-banking financial company (like fintech or insurance) must obtain prior FRA approval. The FRA also enforces new disclosure rules (e.g. annual ESG reporting for listed firms) which impact investor due diligence. Overall, the FRA’s oversight ensures market integrity in share transfers, tenders, and ownership changes, and its approvals and notifications are standard steps in Egyptian M&A.

Types of M&A Structures in Egypt

Egyptian law permits various deal structures. The most common is a share purchase, where the buyer acquires equity in the target company. Share transfers (even for unlisted joint-stock companies) must go through the EGX via a licensed broker. In a share deal the buyer effectively acquires all of the company’s assets and liabilities by operation of law. Transfer of title is relatively quick – typically a few business days (longer for large deals or if regulatory approvals or foreign documentation are needed) – and requires depositing the purchase price into an Egyptian bank account. A key advantage of a share acquisition is business continuity: contracts, licenses, and employees remain in place. The downside is that all liabilities transfer to the buyer (subject only to contractually negotiated indemnities).

By contrast, an asset purchase involves buying selected assets of the target (for example, real estate, equipment, or business lines) rather than its shares. Each asset may require a separate transfer procedure (e.g. a notarial deed for real property or assignment agreements for contracts). Asset deals can be more time-consuming and complex because each asset or license may need third-party consent. On the other hand, buyers may exclude unwanted liabilities, assuming only those obligations expressly agreed. For example, parties often negotiate indemnities for unpaid taxes or employee claims, whereas in a share sale such liabilities remain with the company. In practice, asset sales are often used for carve-outs or restructuring, while share purchases are preferred for full business acquisitions due to procedural simplicity.

Egypt also recognizes statutory mergers and consolidations. Under the Companies Law, two or more companies may merge by consolidation (forming a new company) or merge by absorption (one company absorbs the others). A merger dissolves the merged companies without liquidation, and all their assets, rights, debts and contracts transfer automatically to the surviving or newly formed company. The merged companies cease to exist, and their shareholders receive shares in the acquiring entity as consideration. Crucially, no liquidation is needed – creditors’ rights continue with the survivor. Mergers require board and shareholder approval, typically by an extraordinary general assembly. The Companies Law sets a 75% vote threshold for merger resolutions, although in cases where shareholder liability would increase a unanimous vote is required. Statutory mergers are often used for corporate reorganizations and must also be approved by the General Authority for Investment (GAFI) and other regulators when licenses or investments are involved.

As an alternative to outright acquisition, parties may form a joint venture (JV). Egyptian law permits JVs as either new legal entities (often as limited partnerships or LLCs) or as contractual arrangements. There is no special “JV law” – they fall under the general Companies Law and Civil Code. Under the Companies Law, shareholders can create an LLC or joint-stock company specifically for the JV, with shareholders contributing capital according to contract. Commonly, a JV entity is taxed and operated like any company. Joint ventures are popular where parties want to share risk or combine expertise without a full buyout. Note that under Egypt’s competition rules, a JV that establishes independent operations may itself qualify as an “economic concentration” needing notification (for example if it is a “full-function” JV with its own management and customers).

Pre-Transaction Due Diligence

Thorough due diligence is essential before closing an M&A deal in Egypt. Buyers typically conduct comprehensive legal, financial, tax, and operational review of the target. Egyptian due diligence covers the company’s ownership and corporate records, licensing and regulatory compliance, material contracts, intellectual property, labor and social insurance issues, ongoing litigation, tax filings, and even environmental liabilities. For example, buyers often request certificates from the Egyptian tax authority and verify that the target is up-to-date on tax payments and social insurance contributions. As in other jurisdictions, there are “red-flag” reports (highlighting critical issues) and full due diligence reports prepared. It is also important to understand industry-specific regulations – e.g. ensuring a telecom license allows transfer or that a pharmaceutical company meets Health Authority standards. Recently, environmental and social (ESG) factors have gained prominence: the FRA now mandates ESG disclosure by listed firms, so due diligence may examine sustainability and governance practices of the target.

Conducting due diligence in Egypt follows international norms. A Non-Disclosure Agreement (NDA) is first signed to protect sensitive data. The seller then provides documents – often electronically – for review by the buyer’s advisors. We advise engaging local legal and financial counsel to navigate Egyptian laws and practices. The process may involve site visits and management interviews, especially if assets like factories are being acquired. Findings from due diligence directly shape the deal: they guide negotiation of purchase price adjustments and the scope of representations, warranties and indemnities in the sale agreement. In short, diligent pre-closing review ensures the buyer fully understands the target’s risks and value before committing.

Regulatory Approvals and Compliance

An M&A in Egypt generally requires multiple approvals and filings. First, share transfers in joint-stock companies must be processed through the Egyptian Exchange (EGX) with a licensed broker. The broker files transfer documents with EGX and FRA, and a transfer certificate is issued on closing. Any share deal over EGP 20 million also needs EGX Pricing Committee approval and FRA notification prior to execution. The General Authority for Investments (GAFI) must be notified of any share sale; failure to do so can incur a fine.

Second, specialized regulators must sign off on ownership changes in regulated sectors. For example, acquiring a bank requires the Central Bank of Egypt’s prior approval. Acquiring an insurer or similar non-bank financial company usually needs FRA approval if the stake exceeds 10%. Telecom mergers and transfers of mobile or data licenses require the National Telecommunications Regulatory Authority (NTRA) approval. Companies in the Sinai Peninsula may need the Sinai Development Authority’s sign-off for foreign ownership. Government concessions (e.g. in infrastructure) often have contractual approval conditions.

Third, competition clearance is now mandatory. Egypt has adopted a suspensory merger control regime: if the parties’ turnovers meet set thresholds, a notification must be filed with the Egyptian Competition Authority before closing. (Note that enforcement only began recently; previously the law awaited implementing rules.) Buyers should engage local antitrust counsel to determine if filing is needed.

Fourth, there are foreign ownership restrictions in certain fields. Generally, the law imposes no outright cap on foreign equity – foreign investors enjoy the same rights as Egyptians under the Investment Law. However, by statute or practice, some sectors require Egyptian participation. For instance, companies engaged in commercial agency or real estate brokerage must be 100% Egyptian-owned. Import businesses must have at least 51% local ownership. There are also restrictions on foreign acquisition of agricultural land or strategic industries unless special approval is obtained. In all cases, foreign buyers usually must secure a security clearance as part of the investment or registration process.

Finally, many filings are administrative. Even for a private share deal, the buyer must ensure the target updates its shareholder register and amends its Articles of Association (via an extraordinary general meeting) to reflect the new owners. If the transaction involves an asset purchase, the buyer must register assets: land deeds must be notarized, trademarks re-recorded, vehicle titles changed, etc. Employment transitions, if any, must comply with labor regulations. In summary, successful compliance means tracking the whole checklist: EGX transfer, FRA notifications, sector regulator approvals, GAFI filings, competition clearance, and any contract-specific consents.

Tax Considerations in M&A Transactions

Tax planning is a critical part of any Egypt M&A. Egypt imposes a corporate income tax rate of 22.5% on profits. In addition, various transaction taxes apply: a stamp duty of 0.125% is levied on the sale of shares in resident companies (counting both buyer and seller sides). Notably, a special 0.3% stamp rate kicks in if the deal involves a share-for-share exchange or acquisition of 33% or more of a company in exchange for shares of another Egyptian company. Real estate transfers typically incur a 3% real estate tax (if the deal requires notarization), and asset sales of commercial goods may attract VAT at 14%.

Capital gains tax used to apply at 22.5% on sales of unlisted shares. However, as of mid-2025 Egypt has overhauled this regime: capital gains tax on stock market transactions has been abolished, replaced by a nominal stamp duty of 0.1–0.115% on each share purchase or sale. (Capital gains on Egyptian government bonds and other assets still follow existing rules.) Dividend distributions by Egyptian companies are subject to 10% withholding tax for non-resident recipients. Importantly, Egypt has double tax treaties with over 50 countries, which often reduce withholding rates and may exempt certain gains.

Investors should also consider tax exemptions under the Investment Law. While the law does not specifically grant M&A carve-outs, it offers broad incentives to qualified projects. For example, special and free zones enjoy sweeping tax breaks: equipment imported into these zones is exempt from customs duties, and profits are largely untaxed. Investment Law projects can also get income tax holidays (50% of investment cost deductible) and exemption from stamp duty on incorporation. In effect, if the acquired company is a certified investment project, the buyer may inherit these incentives post-closing. However, careful due diligence is needed – tax attributes rarely transfer automatically in a share sale – so investors usually obtain a tax opinion on the target’s qualifying status.

Post-Merger Integration Strategies

After closing, the hard work of integration begins. Post-merger integration (PMI) is about combining two businesses to realize the deal’s promised value. Key PMI steps include: establishing a dedicated integration team, aligning organizational structures, and merging accounting and IT systems. Foreign buyers should pay particular attention to cultural integration and local management retention; in Egypt’s business environment, relationships and local expertise are crucial. Companies often focus first on cost synergies: consolidating back-office functions (finance, HR) and renegotiating supplier contracts to cut expenses. At the same time, growth synergies should be pursued: cross-selling products, expanding into new regions, or merging R&D efforts. Effective communication is vital – stakeholders (employees, customers, regulators) must be kept informed to avoid uncertainty. Regulatory follow-through is also important: post-closing filings (e.g. tax statements reflecting the change, social security transfers for employees) must be completed promptly. In short, a well-planned PMI – often guided by the initial due diligence insights – ensures the combined entity operates smoothly and achieves the strategic goals of the merger.

Dispute Resolution in M&A Transactions

Deals do sometimes end up in dispute. Egyptian law permits parties to resolve M&A disagreements either in the courts or by arbitration. In practice, international buyers generally prefer arbitration for enforceability. Egypt is a party to the New York Convention, so arbitral awards (e.g. from ICC or CRCICA in Cairo) are enforceable in Egypt and abroad. The Egyptian Arbitration Law (Law 27/1994, as amended) allows contracts to designate arbitration under foreign rules (e.g. UNCITRAL) or institutional rules. Accordingly, many M&A agreements opt for arbitration, often with English or Egyptian law as the governing law. Local litigation is the default forum otherwise; Egyptian courts can hear disputes if the arbitration clause is set aside or absent. It is important to specify the dispute resolution forum in the SPA: a Cairo-seated arbitration with local counsel is common. For public company deals or investment treaty cases, specialized bodies may apply (e.g. an investor could have recourse to ICSID arbitration under a bilateral investment treaty).

Role of Advisors in M&A Deals

A successful M&A deal in Egypt relies on a team of expert advisors. Leading the process are legal advisors, who draft and negotiate the transaction documents, ensure regulatory compliance, and secure governmental approvals. Typically Egyptian law firms guide both buyer and seller on corporate and securities issues. Financial advisers or investment banks often help structure the deal and arrange financing. Accountants and tax specialists conduct financial due diligence, advise on tax-efficient structuring, and model the transaction’s financial effects. Industry consultants or technical experts may be engaged to assess operational or technical aspects of the target’s business. For example, in a manufacturing acquisition, experts might evaluate production facilities; in a telecom deal, regulatory specialists ensure spectrum licenses can be transferred. The target’s management and board are also key stakeholders – they set the strategic direction and approve the deal internally. In short, corporate executives, lawyers, bankers, accountants and consultants collaborate to execute an M&A transaction effectively.

Each advisor has a clear role: the lawyers handle negotiating the SPA and securing clearances; the financial advisors value the company and advise on financing; tax advisers optimize the deal structure; and sector experts validate that the target complies with its industry’s rules. Often, the buyer and seller each bear their own advisory costs (financial assistance for these fees is uncommon). Overall, a well-coordinated advisory team is essential to navigate the complexity of an Egyptian M&A.

Frequently Asked Questions

• Are foreign investors allowed to acquire Egyptian companies?

   Yes. Egypt’s Investment Law treats foreign investors on par with locals. There is no general prohibition on foreign acquisition of companies. However, certain industries carry nationality restrictions: for instance, commercial agents and real estate brokers must be wholly Egyptian-owned. The banking and insurance sectors impose ownership ceilings (e.g. a foreign bank acquirer needs Central Bank approval, and a non-bank finance company buyer requires FRA clearance if exceeding 10%). Real estate in strategically sensitive areas (like much of the Sinai) is also restricted without special approval. In practice, most M&A targets are open to foreign bids, but buyers should check any specific restrictions or approval requirements in the target’s industry.

  
  

• What are the legal steps to complete an M&A deal in Egypt? 

  The process is broadly sequential. First, the parties sign preliminary agreements (NDA, Letter of Intent or term sheet) to set out key terms. Next comes due diligence (see above). Upon satisfactory findings, the parties negotiate and sign the definitive Sale and Purchase Agreement (and ancillary documents like escrow agreements or shareholders’ agreements). The agreement typically conditions closing on obtaining any required approvals (e.g. EGX, FRA, CBE, competition). The buyer then arranges financing and deposits the purchase price in accordance with Egyptian regulations (usually into an Egyptian bank account, via escrow). At closing, a licensed broker executes the share transfer on EGX: once funds are in place and the paperwork filed, EGX and FRA issue transfer certificates, and the target’s register is updated. For asset deals, closing involves notarizing deeds or assignment contracts for the specific assets. Finally, after closing the buyers may need to register changes (tax ID updates, social insurance transfers, etc.) to fully integrate ownership.

  
  

• How are companies valued in Egyptian M&A transactions?

   There is no uniquely Egyptian valuation formula; parties use standard international methods (discounted cash flow, comparable company multiples, precedent transactions, etc.). However, the law provides guidance for certain restructurings. For example, in statutory mergers or demergers the shares are typically allocated based on the book value of each entity’s net assets (unless the General Authority for Investment approves an alternate valuation). In practice, private M&A deals always involve negotiation and often third-party valuers to arrive at a fair price. The key is agreement between buyer and seller, informed by financial audits and forecasts.

  
  

• Are there tax exemptions for M&A under Egyptian investment law?

   The Investment Law does not directly exempt M&A deals, but it does offer broad tax incentives to qualifying projects. Companies licensed under the Investment Law (particularly in free zones or strategic sectors) can enjoy benefits like customs duty exemptions, reduced profit tax, and stamp tax waivers. For instance, projects in designated free zones are exempt from customs duties and most domestic taxes. If an acquisition involves a company already in a special zone or under an investment license, the buyer may inherit those privileges post-closing. Otherwise, normal tax rules (corporate tax, stamp duties, etc.) apply to the transaction itself. Also, Egypt has introduced capital gains exemptions for certain share sales; notably, foreigners selling listed shares were historically exempt from CGT, and now all investors benefit from the 2025 reform replacing CGT with a flat stamp duty. Buyers should consult tax advisors to see if any reduced rates or exemptions under the Investment Law apply to the specific deal.

  
  

Throughout an Egyptian M&A, diligence, planning and local advice are key. This includes respecting the formal corporate procedures (board approvals, shareholder resolutions, contract notarizations) and meeting all regulatory conditions. With careful preparation and the right advisory team, foreign investors can successfully navigate Egypt’s M&A landscape and take advantage of the market’s opportunities.