M&A Guide 2025: Kuwait

There was continued growth in M&A activity in Kuwait during 2024, particularly in the healthcare, aviation, banking, financial services (including fintech), oil, gas, retail, and utilities sectors.

Hot topics in cross-border transactions include the application of the ultimate beneficial ownership rules issued by the Ministry of Commerce and Industry (MOCI), which are creating ongoing compliance issues and would have to be addressed as part of any M&A activity. The Competition Protection Authority (CPA) continues to be increasingly active in merger control to ensure compliance with the Competition Law (Law No. 72 of 2020). Meanwhile, transaction parties are becoming increasingly aware of competition regulation issues.

Financing considerations continue to impact deal structures, particularly in relation to the provision of security for financing, while continued attention has been paid to material adverse change (MAC) clauses, driven by, among others, conflicts in nearby jurisdictions.

The Kuwaiti market remains primarily driven by private M&A.

ASAR – Al Ruwayeh & Partners is involved in a transaction in which issues regarding break fees and what will amount to a MAC have been strongly debated. While the break fee requirement was conceded by the seller, the conditions that would constitute a MAC were strictly defined. Parties are also showing increased interest in warranties insurance.

M&A activity in 2023 was robust, but there is no doubt that 2024 saw a further increase in deal flow.

Judging from the activity of the first quarter of 2025, it is expected that 2025 will be another strong year for deal flow and possibly stronger than 2024. While the acquisition activity is mainly driven by strategic buyers, certain key acquisitions are being made by financial investors. Private M&A deals outnumber public M&A transactions, which is consistent with recent history.

Financing considerations continue to impact deal structuring, particularly in relation to the provision of security for financing. Kuwaiti law’s foreign ownership restrictions also affect M&A transactions and have to be catered for accordingly.

While financial and strategic investors have had a limited impact on the M&A market in Kuwait in the past, there has been an uptick in their involvement in recent times.

The regulatory bodies are primarily:

• The MOCI;

• The Kuwaiti Capital Markets Authority (CMA);

• Boursa Kuwait;

• The CPA; and

• Other sector-specific regulators, as applicable.

The key legislation governing public M&A in Kuwait is Law No. 7 of 2010, as amended (the Capital Markets Law, or CML) and its executive CML Bylaws, which together comprise the CML Rules, particularly Book IX (Mergers and Acquisitions) of the CML Bylaws. 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 Exchange);

• A listed or unlisted company in the event of a reverse acquisition; or

• A listed company by way of a partial purchase offer (resulting in an acquirer holding no less than 30% and no more than 50% of the shares of a listed company).

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 (MTO) must be made to the remaining shareholders when the offeror acquires more than 30% of the shares of a listed company. Private M&A is largely governed by the Companies Law, Law No. 1 of 2016.

The Competition Law provides additional regulation in relation to merger control in Kuwait. Under the new Competition Law, persons participating in “economic concentrations” are required to apply to the CPA for approval in certain circumstances. The Competition Law considers the following circumstances to be “economic concentrations”:

• A merger between two persons or more by way of absorption or combination that may lead to “control” or increased “control”;

• An acquisition of direct or indirect “control” by one person in all or parts of another person or persons, whether by the acquisition of assets, ownership rights, beneficial interest; the purchase of shares, stock, or liabilities; or any other way; and

• The existence of a partnership between two persons or more that leads to a permanent and independent economic or commercial activity, regardless of the legal form or activity exercised.

A notification is required if the value of the parties’ registered assets or relevant annual sales in Kuwait, according to audited financial statements for the last financial year before “economic concentration”, exceed thresholds ranging between KWD500,000 and KWD2,500,000.

Other laws/rules that may be of particular significance include:

• The Boursa Kuwait Rulebook, which was also issued under the CML and impacts the sale and acquisition of listed companies, as well as how these are processed;

• The Promotion of Direct Investment Law No. 116 of 2013 and its regulations, which regulate certain investments from abroad and the possible exemption from local ownership requirements; and

• The Tax Law No. 3 of 1955 and its regulations, which require certain actions be taken in relation to, and that would affect, the structures used in such M&A activity, as well as the payment of profits on such transactions.

As touched on above, the MOCI issued Resolution No. 4 of 2023 on the Procedures for the Identification of the Actual Beneficiaries, which requires corporate persons in Kuwait to identify and register “actual beneficiaries”.

Actual beneficiaries have been defined as any natural persons who possesses or exercise definitive and final control, whether directly or indirectly, over the person on whose behalf the transaction is being conducted, and who exercise actual and definitive control over a corporate person or a legal arrangement.

Subject to certain exemptions (which include recent exemptions in favour of entities, and their majority-owned subsidiaries, listed on local and international stock exchanges that are subject to equivalent disclosure/transparency rules regarding beneficial ownership), the ultimate beneficial owner rules require companies to maintain a register of ultimate beneficial owners and to submit this register (and updates to it) to the MOCI.

There have also been developments regarding the ownership of land. In this regard, Decree Law No. 7 of 2025 (which amended Decree Law No. 74 of 1979) allows for listed companies with non-Kuwaiti shareholders, as well as Kuwait licensed real estate funds and investment portfolios, to own real estate. The amendments also permit companies licensed by the Kuwait Direct Investment Promotion Authority (which could include companies wholly owned by foreigners) to own real estate properties required for the management of their operations or the housing of their staff.

Prior to these amendments, only companies wholly owned by Kuwait or Gulf Cooperation Council nationals could legally own real estate. These amendments pave the way for foreigners to make indirect investments in Kuwaiti real estate, which marks a significant and potentially positive shift in the regulation of real estate ownership in Kuwait.

Significantly, Kuwait is also in the process of reforming its tax laws. As an initial step in this process, the Law of Taxation on Multinational Entities, No. 157 of 2024 (the MNE Tax Law), was issued on December 30 2024 pursuant to the global BEPS initiatives and the OECD pillar two model rules.

Under the MNE Tax Law, and subject to certain exemptions/qualifications, multinational entities operating in Kuwait that form part of a group that generates annual revenues of €750 million or more are subject to a tax of 15% on their Kuwaiti profits. It is noteworthy that this is not in addition to the existing income tax obligations imposed on foreign parties; rather, the MNE Tax Law seeks to ensure that such multinational groups pay tax on their Kuwaiti income at an effective rate of 15%.

Certain additional reforms to the Kuwaiti tax rules are mooted. There has also been a steady drive to relax Kuwait’s rules on foreign parties doing business in the state. Most recently, Kuwaiti Commercial Law No. 68 of 1980 was amended (through Law No. 1 of 2024) to allow for foreign companies to establish a Kuwaiti branch of their activities. However, as regulations to implement these reforms remain outstanding, the MOCI is yet to allow for the establishment of such branches. While this change is not currently being implemented, along with the other recent reforms (including that noted above on the ownership of land), it is indicative of a paradigm shift.

Some of the misconceptions about the Kuwaiti market include that there are no tax obligations in relation to Kuwaiti target companies and that Kuwait does not require competition approvals for transactions. Foreign entities seeking to acquire Kuwaiti assets are often also not aware of the restrictions on foreign parties doing business in Kuwait, but these points are typically addressed pre-transaction as part of deal structuring.

Furthermore, a common mistake made by practitioners is to import legal structures and documentation developed in other jurisdictions without a proper adaptation to the peculiarities of the Kuwaiti legal system. This can lead to complications in the execution phase of the transaction and in the enforcement of rights arising under M&A transaction documentation.

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 Kuwaiti competition regulations. Furthermore, providing M&A/investment advisory services with respect to securities onshore of Kuwait is a regulated securities activity under the CML Rules. As such, foreign service providers should be aware of the restrictions applicable in connection with the rendering of such services onshore in Kuwait.

Technology is playing an ever more significant role in the M&A dealmaking process. It is also key in identifying the latest trends, benchmarking, and further enhancing the knowledge system databases of M&A practitioners. The great advances made in cognitive technology – such as AI software – also enable the rapid identification and extraction of key provisions through the review of thousands of transaction documents within a relatively short space of time.

The general conditions for a public M&A transaction have been outlined above, but there are some key factors that specifically concern takeovers. In such cases, parties must obtain all relevant regulatory consents from the applicable regulatory body, such as the CMA for licensed companies and/or (as applicable) the Central Bank of Kuwait (CBK) vis-à-vis financial institutions that are subject to supervision by the CBK. Disclosure of the transaction is also required as per the CML Rules.

Parties must also abide by the laws and regulations of each sector. For example, pursuant to the CML Rules, for companies listed on the exchange of Boursa Kuwait, an 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 exchange.

Hostile bids are not common in Kuwait, although the law currently provides for competitive bids during the mandatory takeover process. In addition, during a block trade, there is a public auction during which a person could instigate a hostile bid. Hostile bids would be treated as takeover bids, and therefore there are no special conditions that would attach to one. Off-market trades are also now provided for under the Boursa Kuwait Rulebook, facilitating transfers of listed shares between parties, although certain conditions apply, including in relation to the minimum value of the trade. However, an added benefit is that contracting parties are not exposed to the risk of competing bids.

An MTO must not be subject to conditions that can only be satisfied at the discretion, and in the subjective judgement, 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 (VTOs) may be subject to conditions required by the bidder. However, in the case of an MTO, no conditions may be imposed by the bidder.

There are no specific rules in Kuwait dealing with break fees, and parties are free to agree arrangements to this effect. Break fees are starting to be seen more frequently.

There is significant use of locked-box mechanisms in Kuwait, although completion accounts are becoming increasingly popular, particularly as the periods between signing and closing increase (whether due to the requirements for regulatory approval compliance or the global nature of a transaction). The use of warranty and indemnity insurance has remained limited over the past 12 months, but there is increased interest in taking it up.

As with public M&A, an MTO must not be subject to conditions that can only be satisfied at the discretion, and in the subjective judgement, of the bidder or the target company, or where their satisfaction is within the control of the bidder or the target company. Only VTOs may be subject to conditions required by the bidder. In the case of an MTO, no conditions may be imposed by the bidder.

The use of foreign governing law and/or jurisdiction (for example, English and Welsh law, and English courts/arbitration in London or Dubai) is more common in the case of mid- to upper-tier M&A transactions involving at least one foreign party, and less so in relatively small or purely local M&A transactions.

Exits in the market are usually structured as share sales. Given licensing and transfer issues, trade sales are becoming less attractive but remain relevant when corporate divisions are being sold (as opposed to the whole of a seller’s enterprise).

Continuing from 2024, the market is looking exceptionally positive, as a number of legislative reforms make their way into operation and public projects come online.

The authors expect an increase in firms committing to improve their ESG positions in their corporate strategies in 2025 to address the ESG-related concerns of potential acquirers.

Continued activity in merger control is also expected, in compliance with the notification thresholds of the CPA.

The use of hitherto popular UAE-incorporated holding vehicles for Kuwaiti businesses may start to decline due to the enactment of new corporate tax legislation in the region, which may, in certain cases, increase tax exposure and limit possible tax benefits that were previously available.