KUWAIT Law and Practice Contributed by: Ezekiel Tuma, John Cunha and Luis Cunha, ASAR – Al Ruwayeh & Partners
6. Structuring 6.1 Length of Process for Acquisition/Sale Each transaction is different, and considerations which arise depend on the circumstances of each transaction. With regard to private transactions, one may generally expect a transaction timeline of about 12 to 16 weeks from pre-transaction. This estimate includes pre-transaction structuring, due diligence, negotiation of documentation and closing. In the event that the approval of the CPA is required, the transaction timeline may be extended for up to another 60 to 90 days from the date documents are signed assuming no objections to the application are submitted by third parties. Such third-party objections materially extend the applicable timelines. 6.2 Mandatory Offer Threshold As noted above, a person who has come into posses - sion of more than 30% of the voting shares of a listed company is required to launch a mandatory takeover under the CML Bylaws within 30 days of the acquisi - tion of the shares. 6.3 Consideration If the takeover is a mandatory takeover, the considera - tion required by the CMA under the Mandatory Takeo - ver Regulations is an unconditional cash offer. Where the takeover is a voluntary takeover, the consideration can take the form of a mixture of cash and shares. The CML Bylaws do not prescribe any minimum level of consideration under a voluntary takeover. In sectors with high valuation uncertainty and where the consideration is cash, there has been an increased use of completion accounts as opposed to locked box mechanisms. Sellers are also increasingly negotiating earn-outs into their transaction documentation given certain volatility which has been prevalent during the last few years. 6.4 Common Conditions for a Takeover Offer An offer must not be subject to conditions that can only be satisfied at the discretion, and in the subjec - tive 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
apply. Similar considerations may apply where there is unusual trading activity. Where disclosure of material information would preju - dice the confidentiality of negotiations or preliminary procedures for a transaction involving a listed entity, that entity may delay disclosure until a binding agree - ment is entered into. However, this approach is sub - ject to strict requirements: • the delay should not be intended to mislead; • the listed entity must take measures to ensure con - fidentiality of the information; and • after subsequent disclosure, the listed entity must provide the CMA with justification for the delay and may be subject to disciplinary action if there was no valid justification. That said, the listed entity may also approach the CMA prior to delaying disclosure to test the validity of its justification in delaying disclosure. 5.2 Market Practice on Timing Market practice on timing of disclosures differs from legal requirements, as described in 5.1 Requirement to Disclose a Deal . 5.3 Scope of Due Diligence The scope of due diligence tends to be in line with that which is expected abroad of an acquirer to satisfy themselves as to the business of a target entity and any risks associated with it. While a full due diligence tends to be required, an abbreviated red flags due dili - gence exercise is becoming increasingly popular, with added warranties to help mitigate the risks involved. 5.4 Standstills or Exclusivity Both standstills and exclusivity are common during the stakebuilding phase. 5.5 Definitive Agreements Documentation of offer terms and conditions is com - mon during the stakebuilding phase. However, man - datory offers and voluntary takeover offers are docu - mented in their respective offer documents. Note that mandatory offers are required to be unconditional.
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