We are often asked to complete work within challenging timeframes. More so in the case of transactional work. Here is one example of our work for an individual client who, as a result of circumstances, needed a deal to be struck very quickly and efficiently.
Mr X held a 40% stake in a private company in one of the free zones in Dubai. Unfortunately, personal circumstances meant that Mr X needed to sell his shares as soon as possible, without compromising on (i) his relationship with the other (majority) shareholder; and (ii) the sale price that he could achieve for his shares.
We were brought in to advise Mr X on the exit. We worked with a financial advisor to ensure that the value to be attributed to the business and, consequently, to the shares, was not somehow lessened due to the urgency of the sale.
It soon became apparent that it would make most commercial, legal and business sense for Mr X to offer the shares to the other shareholder, a multinational organization with several layers of decision-making.
With different objectives at play, the parties engaged in a period of intense discussions on commercial terms; the other shareholder’s objectives were to ensure a smooth sale, a good price for them and to maintain a balanced approach. They needed to ensure that Mr X did not choose to retain the shares, which would ultimately end up in the hands of his heirs (i.e. third parties that the other shareholder did not necessarily wish to deal with).
Challenges and successes
The three main challenges in this deal were:
- balancing the needs of both commercial parties: our client, an individual who understandably did not always appreciate the intricate legal issues of a deal of this nature and the potential buyer, a large organization that did not always appreciate the manner in which business is conducted in the UAE. We helped by communicating legal issues according to our audience, whilst also ensuring that the objectives of each party were being met;
- time being of the essence: because of the urgency of the sale, we worked with the parties and other advisors at breakneck speed. As we use technology in everything we do, we were able to turnaround documents, engage with parties and complete the deal in a time-efficient manner;
- assisting the counterparty with its issues in navigating the regulatory regime in the UAE: while the counterparty had completed a number of deals in the West, they were not familiar with the regulatory framework in the Middle East. Being able to effectively navigate the regulatory regime ultimately led to a saving in terms of time and costs, for both buyer and seller.
How did we add value?
- expedited document preparation and discussions, saving time and costs for our client;
- used our knowledge and experience of applicable law and market practice to negotiate a ‘balanced’ set of definitive documentation for our client, thus reducing their exposure to associated risk;
- liaised with all parties and acted as ‘project manager’, leaving our client more time to attend to other matters;
- obtained informal ‘pre-approvals’ for definitive documentation, to the extent possible, from the free zone regulator, thereby reducing the time that the client would have to spend on the signing date; and
- used our low cost base to our client’s advantage and, together with all of the above, delivered a high quality legal service at a very efficient price.
By highlighting the specific legal and jurisdictional risks to the other shareholder, we helped Mr X walk away with a better price for his shares, and a deal that was completed in record time.
As far as deals go, this one definitely gave us the opportunity to help our client achieve both, his commercial (sale of the shares) and personal (more time to focus on other matters) objectives.
If you are a UAE business owner and thinking of a sale, you may also wish to read our post on the 5 key legal issues to consider when selling your business.