M&A Guide 2025: Bahrain

Over the past few years, Bahrain has experienced tremendous growth in M&A activity, driven primarily by industry consolidation in key sectors such as banking and insurance. Additionally, restructuring initiatives have played a vital role in boosting M&A activity as companies seek to optimise their operations and enhance market competitiveness.

A key factor in the M&A landscape is Bahrain’s antitrust regime, which aims to prevent market monopolisation and ensure fair competition, particularly in cross-border transactions, where compliance with these regulations is crucial.

At the same time, the market has seen widening valuation gaps between buyers and sellers, which often constitute an insurmountable obstacle to closing deals. However, practitioners are increasingly finding innovative solutions to bridge these gaps, enabling transactions to move forward despite these challenges.

These regulatory and market dynamics underscore Bahrain’s commitment to fostering a transparent and well-regulated M&A environment that aligns with international best practices while encouraging both local and cross-border transactions.

The Bahraini M&A market has traditionally been driven by private transactions, with privately held businesses and family-owned enterprises being the primary participants. However, there has been a significant uptake in public M&A transactions in recent years, often involving national champions –large, strategically important companies that play a key role in the economy. These public transactions now frequently exceed private deals in terms of deal value, reflecting a shift in market dynamics. The increasing prominence of public M&A is driven by factors such as industry consolidation, regulatory developments, and strategic initiatives aimed at strengthening key sectors.

While private M&A remains active, the growing scale and complexity of public transactions highlight their rising influence in Bahrain’s dealmaking landscape.

Bahrain’s M&A landscape has recently witnessed several significant transactions that have spurred discussions likely to influence future deals.

One notable transaction was Saudi Basic Industries Corp (SABIC)’s agreement to sell its 20.62% stake in Aluminium Bahrain (Alba) to the Saudi Arabian Mining Company (Ma’aden) for approximately $1 billion. Another significant development was United Gulf Holding Company’s agreement to sell its wholly owned subsidiary, United Gulf Bank, to Burgan Bank for $190 million.

These transactions highlight the growing role of Gulf Cooperation Council (GCC)-based players in shaping Bahrain’s M&A activity, as regional financial institutions continue to drive consolidation efforts and strategic expansions. M&A in Bahrain is frequently fuelled by GCC investors, which seek to strengthen their market presence and enhance regional synergies. The transactions also reinforce the trend of cross-border deals within the Gulf, further integrating Bahrain’s economy with its regional counterparts.

Such developments underscore the evolving dynamics of Bahrain’s M&A market, emphasising the importance of strategic realignments and sector consolidations.

M&A deal flow in 2024 saw a significant increase compared with 2023 and previous years, reflecting strong market momentum, driven by industry consolidation, restructuring initiatives, and increased cross-border activity, particularly within the GCC. Strategic acquisitions in key sectors such as banking, insurance, and industrials spurred this upward trend, as well as a growing appetite for transactions involving national champions.

This positive trajectory is expected to continue into 2025, with a number of high-profile deals already in the pipeline. The combination of favourable market conditions, regional economic integration, and evolving regulatory frameworks suggests that Bahrain will remain an active hub for M&A activity in the near future.

In the next 12 months, an increase in M&A deal flow is expected in Bahrain, driven by several factors. One catalyst will be the seeking of economies of scale through consolidation, as companies look to boost profitability, which has remained stagnant in many industries. This trend is particularly evident in sectors such as banking and insurance, where firms are increasingly merging to strengthen their competitive positions. Additionally, partial privatisation of government assets could serve as another significant growth driver, as the government seeks to optimise its portfolio and attract private investment.

There has been a growing appetite for share swap deals, as companies seek to combine their operations without the immediate need for cash outflows. This trend is also influenced by the current interest rate framework, which remains higher than in recent history, making bank funding for acquisitions more expensive. As a result, companies are increasingly opting for equity-based deals such as share swaps to reduce the reliance on costly debt financing while still pursuing strategic combinations. These factors have had a significant impact on the structuring of deals in Bahrain’s M&A market, reflecting a cautious yet strategic approach to acquisitions.

Financial investors – including private equity firms, SPACs, and various funds – have historically played a relatively marginal role in Bahrain’s M&A landscape. However, their influence is growing, as evidenced by recent transactions such as the announced merger between Truffle Hospitality Holding W.L.L., owned by Dividend Gate Capital, and Bahrain Family Leisure Company B.S.C. This merger, announced in December 2024, represents a significant development in Bahrain’s food and beverage sector, highlighting the increasing involvement of financial investors in facilitating strategic consolidations.

Traditional players such as Investcorp and Gulf Finance House remain a driving force, especially for outbound transactions. Finally, players such as BlackRock have also shown an interest in the local market with the announced acquisition through a managed fund of a stake in the Saudi–Bahrain Pipeline Company. These developments indicate a shift towards greater participation by financial investors in Bahrain’s M&A market.

In Bahrain, M&A activity is governed by several pieces of key legislation, including:

• The Commercial Companies Law (CCL);

• The Central Bank of Bahrain and Financial Institutions Law (the CBB Law); and

• The Takeovers, Mergers & Acquisitions Module of Volume 6 of the Central Bank of Bahrain Rulebook (the CBB Rulebook).

The CCL sets out the framework for transactions involving the share capital of private and public companies, while the CBB Law deals with certain regulatory aspects of M&A transactions. Additionally, Resolution No. (54) of 2023 outlines the rules for M&A involving shares in companies listed on exchanges licensed by the CBB, ensuring a regulated and transparent process for these transactions.

Resolution No. (54) of 2023 introduces significant changes to Bahrain’s M&A regulatory landscape, though they are not entirely innovative, as some provisions replicate those already present in the Takeovers, Mergers & Acquisitions Module.

However, the resolution does have some key innovations, notably the definition of merger types, such as merger by absorption and merger by consolidation, which were not previously covered in the TMA regulations. These new definitions provide greater clarity on the legal structure of mergers and the processes involved. Additionally, Bahrain’s new domestic minimum top-up tax for multinational enterprises (MNEs), effective in 2025, aims to ensure that MNEs pay a minimum tax rate of 15%, aligning with international tax standards. This would certainly have a bearing on M&A transactions.

Several legislative and regulatory frameworks are the subject of discussion in Bahrain and the outcomes could impact M&A activity, including potential amendments to the CCL. These changes may influence how M&A transactions are structured and executed, especially for cross-border deals. The parties involved should be aware of any future modifications to ensure compliance with evolving legal requirements and to manage potential risks effectively.

A common misconception in Bahrain’s M&A market is that deals can be structured around exemptions from applicable regulatory provisions. This belief is misguided, and it can lead to serious issues. M&A deals must be meticulously planned within the context of existing regulations. Additionally, M&A specialists at the Capital Markets Supervision Directorate are highly competent and well prepared to ensure the smooth execution of transactions, making it essential to align with regulatory requirements throughout the process.

A frequently overlooked area in M&A transactions is the timing of legal and financial advice. Parties often seek counsel too late in the process, sometimes after binding agreements have already been entered into. This delay can lead to critical issues that may be difficult to resolve during the deal, highlighting the importance of seeking expert advice early in the planning stages to avoid complications later on.

Technology plays a significant role in the M&A dealmaking process, particularly during the due diligence phase through the use of electronic data rooms and other digital tools for information sharing and analysis. As AI-based solutions continue to advance, their role is expected to expand dramatically. AI agents specialised in M&A could revolutionise the market by automating tasks, improving efficiency, and offering deeper insights, potentially transforming the landscape of dealmaking.

Obtaining control of a public company in Bahrain requires passing through a voluntary tender offer, either general or partial, in accordance with the Takeovers, Mergers & Acquisitions Module of Volume 6 of the CBB Rulebook. This process is highly regulated and complex, beginning with initial approaches to the target’s board and continuing through the offer settlement. In certain cases, a compulsory squeeze-out may be triggered following the completion of the offer, adding another layer of regulation and oversight to the transaction.

A public takeover offer typically includes an acceptance condition, which is mandatory unless the offeror already controls more than 50% of the share capital. In take-private offers, this condition may be as high as 90% to facilitate a compulsory squeeze-out of non-accepting shareholders. Regulatory conditions, such as antitrust approvals, are also common, requiring authorisation from relevant authorities. However, material adverse change (MAC) conditions or consents from private third parties are rarely included.

In public M&A transactions in Bahrain, regulatory rules heavily restrict the ability to withdraw an offer once it has been launched. Deal protection measures, such as break fees – agreed with the target company’s board in case shareholders reject the offer – are rare and are often considered to have questionable validity. These regulatory constraints are designed to ensure that once an offer is made, it is genuinely intended to proceed unless there are significant changes.

In Bahrain’s M&A market, locked-box mechanisms have gained significant popularity, far outpacing completion accounts. Earn-outs are becoming more common to address valuation gaps, though it is uncertain if this is a true trend. Warranty and indemnity insurance remains relatively rare in these transactions, reflecting the conservative approach in structuring deals. The market is still evolving, and while certain mechanisms are gaining traction, their application is not yet widespread.

For private takeover offers, there are no formal takeover offers like those for public companies. Instead, private companies are transferred through negotiated deals. These deals typically include a wide array of conditions precedent, such as:

• Regulatory and antitrust approvals;

• Consent from key third parties;

• MAC clauses; and

• Ensuring the accuracy of representations and warranties at closing.

It is common practice to provide for a foreign governing law and/or jurisdiction in private M&A share purchase agreements (SPAs). However, ASAR – Al Ruwayeh & Partners typically recommends against this, as the proprietary effects of the SPA (such as the transfer of shares) would have to be governed by Bahraini law. While having an SPA governed by a foreign law is not unlawful, it can create complications in practice.

The exit environment in Bahrain remains challenging. The IPO market has been dry, with only one IPO in the past five years.

While the private equity industry in Bahrain is developed, it is largely focused on outbound opportunities. Private sales continue to be the primary exit route. There is hope for improvement, but the outlook for 2025 suggests that trade sales will likely remain the dominant exit strategy for companies in Bahrain.

The authors anticipate a record year for deal values in 2025, particularly with the expected completion of the National Bank of Bahrain–Bank of Bahrain and Kuwait merger. However, the trend of industry consolidations might have reached its peak, potentially leading to a slowdown towards the end of the year and into 2026.

Regarding legal practice, firms will need to adapt technologically to remain competitive, leveraging AI and data analytics to support dealmaking, or risk becoming obsolete in an increasingly tech-driven environment.