December 2023
Immigration
Middle East | Navigating Immigration Considerations: Mergers, Acquisitions, and Other Corporate Changes
Impact High
Summary
In today’s interconnected world, corporate changes involving mergers and acquisitions, consolidations, spinoffs and other forms of restructuring (collectively, M&A) have become vital strategic tools for businesses seeking growth and expansion, or needing to right-size their operations. As companies engage in cross-border M&A activity, it is crucial to understand and navigate the complex landscape of global immigration considerations.
According to data from Statista, North America and Europe remain the leading regions in terms of M&A activity.
The Middle East is also experiencing dynamic activity within the M&A space with a total of 318 merger and acquisition deals amounting to USD 43.8bn during H1 of 2023. Since the pandemic there has been increased activity and consolidation in sectors such as consulting, finance, technology, fintech, healthcare and energy. Indeed cross border deals have been a key tool for supporting the region’s economic growth. However, given the current geopolitical landscape and the nature of M&A work, this can be a complex area to navigate.
There are a number of reasons why the Middle East has become an increasingly attractive region for M&A activity. These include the region’s sustained economic growth making it attractive for foreign investors; location – the Middle East is strategically located between Asia, Europe and Africa making it a natural hub for global trade and commerce, particularly for companies looking to expand their presence in other regions. Strong infrastructure – with many Middle East countries investing heavily in their infrastructure there are ongoing opportunities in construction, transportation and logistics; Technology, Innovation and Energy – the region remains a key player in the energy market resulting in ongoing M&A activity within the sector as energy companies continue to diversify their portfolios. In addition, the region is focused on increasing investment in technology and innovation leading to ongoing activity in the region within these sectors. The region also benefits from a young and highly educated workforce, resulting in highly skilled workforces in the region.
In this article, the Vialto Middle East M&A team explores the key immigration and mobility considerations that employers should bear in mind during such transactions in the region.
The current global economic situation and M&A activity
Globally there has been a surge in M&A activity in recent years, particularly post pandemic with companies responding to economic challenges by reevaluating their structures and exploring new territories in order to access new markets and diversify their operations geographically, or consolidate and reorganise their businesses. This enables companies to tap into new talent pools to achieve a competitive advantage, and achieve economies of scale, or increase profits. By merging with or acquiring companies in other countries, organisations can quickly establish local operations and leverage established networks and expertise.
M&A activity can have a wide reaching impact on global workforces and foreign nationals who are on sponsored work permits or who have taken steps to gain permanent residency. This can also result in additional costs for employers, including additional reporting and filing costs. Read on to learn more about key immigration considerations and the main immigration priorities and risks for companies when embarking on M&A activity.
Key M&A immigration considerations for employers
When engaging in M&A activity, employers must carefully consider immigration matters to ensure a smooth transition for their workforce. Here are some essential immigration considerations for companies embarking on M&A activity:
1. Assessing workforce mobility: Employers should conduct a comprehensive analysis of the workforce of both the acquiring and target companies. Understanding the immigration status of employees and their ability to work in different jurisdictions is crucial. This assessment helps identify potential visa, work permit, residency, and compliance issues that may arise as a result of the M&A process.
2. Managing employee transfers: During M&A transactions, companies often relocate employees across borders or to new locations in the same country. It is important to understand the immigration requirements of the destination country as well as timelines, and ensure compliance with local laws and regulations. Proactively addressing visa, work permit and residency applications, as well as avoiding potential work authorisation gaps, is essential to maintain business continuity.
3. Harmonising immigration or global mobility policies: Merging companies often have different immigration policies and practices. Harmonising these policies and aligning them with the new organisational structure is vital. Companies should establish clear guidelines for managing work permits, visas, residency, and immigration compliance, ensuring consistency and clarity for employees throughout the transition. This may also entail assessing different immigration data management applications to identify the potential need to integrate different data sources.
4. Addressing compliance and due diligence: Compliance with immigration laws and regulations is critical to avoid potential legal issues, reputational damage, and status violations by the employees’ and their family members. Conducting thorough due diligence of the target company’s immigration practices is crucial to identify any compliance gaps or potential liabilities. This allows employers to address any deficiencies and mitigate risks effectively.
5. Retaining/acquiring key talent: As mentioned above, one of the primary reasons for M&A activity is talent acquisition and retention. Retaining key employees during and after the transition is essential for business continuity and long-term success. Employers should consider immigration-related incentives or benefits to retain critical personnel, such as sponsoring work permits, facilitating visa transfers, or providing relocation assistance.
6. Complying with statutory labour protections: Some countries impose duties on a surviving or acquiring company to satisfy employment obligations and protect the rights of displaced employees. An assessment of local laws affecting displaced workers is essential before the transaction closes.
7. Government Approvals: It is important to determine whether the M&A deal triggers any government approvals or notifications related to immigration matters, such as changes in ownership control that require the transfer of immigration related licences or registrations. In certain jurisdictions, e.g. the UAE and Qatar, where there has been a change to the entity name, an application to the authorities must be made to amend the employee’s residence permit. Additionally, in case the M&A deal triggers the establishment of a new entity and the closure of the current one, a sponsorship transfer of all the employees will be required.
8. Employee Communication: Communication with employees about the deal and any potential changes to their immigration status or work arrangements is important. Providing clear and transparent information regarding the impact of the deal on the employee’s immigration processes, work permits, and any necessary steps they need to take should be paramount.
9. Integration of Immigration Systems: There will need to be an integration of immigration systems, database, and processes to streamline and centralise immigration related functions in order to improve efficiency, and facilitate consistent management of immigration matters across the merged entities.
Regional considerations – M&A activity in the Middle East
Whilst there are general considerations that can be applied to workforce planning during M&A activity, the Middle East does come with specific opportunities, considerations and challenges. These include:
Regulatory compliance
Immigration rules and regulations often undergo frequent changes in different jurisdictions – and this has been particularly true post pandemic, with immigration rules playing catch up with new ways of working and travelling and with technological advancements never contemplated when the rules were originally enacted. M&A transactions that involve international operations must take into account potential regulatory changes that could impact the immigration status of employees. It is important to stay informed about legislative developments, government policies, and regulatory updates to ensure ongoing compliance and effective management of immigration-related risks.
There are numerous regulatory systems across the Middle East to navigate that can increase regional specific challenges. Each jurisdiction will have its own set of rules and procedures for corporate restructuring which requires considered and careful analysis.
Immigration and labour inspections in the UAE and Saudi Arabia are common, and changes to the trade licence as example could result in an inspection by the authorities. In addition, any findings of illegal working where employees do not have the correct work authorisation, have consequences ranging from Immigration portal blocks (preventing employers from being able to apply to sponsor expatriates) to large financial penalties, as well as reputation damage. Companies acquiring organisations in the UAE Mainland for example, will also need to consider localisation policies i.e. Emiratisation, and how they quickly will be required to meet local hiring targets. Saudisation rules in Saudi Arabia are also stringent, careful attention is needed to ensure compliance with this and whether incoming employees from the acquired company do not affect Saudisation targets or quotas.
Cultural sensitivity and integrating global workforces
Understanding different cultural nuances is critical for effective communications with different stakeholders, particularly in the context of cross border M&A deals, where teams move from one country to another e.g. changes in headquarters. This is also integral to effective integration post deal and harmonising of cultures and policies.
Managing talent, particularly across different territories in the region requires consideration of territory specific protectionism policies, such as quotas and fair hiring practices. Understanding your population make up (both pre and post deal) is essential to effectively navigate territory specific requirements.
Political instability
The region is currently facing geopolitical challenges given the ongoing war in Israel-Palestine. Crises such as war results in increased uncertainties for businesses: from the security and safety of global workforces to ongoing business continuity and compliance. Understanding the geopolitical risks and how best to navigate and protect against uncertainties is key for successful M&A activity in the region.
Visa and work permit transfers:
When merging or acquiring a company, or embarking on other corporate changes, the transfer of employees across borders is commonplace. As such, navigating the complexities of transferring visas, work permits and residency applications is crucial to maintain business continuity and compliance. Employers must understand the specific requirements and timelines for transferring or displacing noncitizen employees. This may involve reapplying for visas, work permits and residency applications or transferring existing ones to the acquiring company, which may take on the role of sponsoring organisation under a principle known as immigration successorship in interest.
In the UAE, the mechanism or framework to ‘transfer’ employees from one entity to another will depend on various factors including the type of transfer and validity of the employee’s permit for example. In addition, it will also depend on whether it is a transfer within the same Free Zone jurisdiction known as an Intra company Free Zone transfer or within Free Zones in the same Emirate known as an Inter Free Zone transfer. Transferring employees from Mainland to Free Zone for example, will involve a different process. Understanding the process associated with each jurisdiction in which both entities operate (the transferring entity and the new employer or sponsoring entity), is critical to be able to advise on process and timelines and ensure that employees have the correct Immigration documentation and work authorisation.
How we can help
Global M&A activity continues to transform the business landscape. As companies engage in these transactions, understanding and proactively addressing the complex immigration considerations are crucial. Whenever M&A activity is envisioned, we recommend that an immigration and mobility consultation be arranged as soon as possible in order to discuss timelines, costs and compliance issues, protect against disruption and ensure business continuity and prosperity.
Vialto’s M&A team provides specific guidance and advice on assessing workforce mobility, managing employee transfers, harmonising immigration policies, ensuring compliance, and retaining key talent. Our global mobility and immigration lawyers and professionals work closely with companies to support employers with navigating the global immigration landscape effectively during M&A transactions, while enhancing employee retention and morale. Proactive planning and engagement with immigration experts contributes significantly to the success of these endeavours, enabling organisations to leverage the benefits of M&A while mitigating potential challenges.
Listen for more insights:
Listen to our ‘On the Move’ podcast episode 25: ‘Don’t let immigration issues derail your M&A deal’ where our global immigration team, led by Sharan Kundi (Partner, Global Immigration Practice Lead), discuss how immigration can impact a transaction, and provide practical advice on how you can address this important issue.
All our ‘On the Move’ podcast episodes can be accessed here:
https://vialtopartners.com/podcasts
Contact us
For a deeper discussion on the above, please reach out to your Vialto Partners point of contact, or alternatively:
Anir Chatterji
EMEA Immigration Partner
anir.chatterji@vialto.com
Rekha Simpson
Director, UAE Immigration Lead
rekha.simpson@vialto.com
Ali Ibrahim
Director, KSA & Bahrain Immigration Lead
ali.a.ibrahim@vialto.com
Raj Mann
Director, Global Immigration Advisory Lead
raj.x.mann@vialto.com
Further information on Vialto Partners can be found here: www.vialtopartners.com
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Contact us on the following address – me-immigration@vialto.com