i OVERVIEW OF M&A ACTIVITY

The Egyptian economy had been struggling since the January 2011 Revolution, with increasing budget and trade deficits coupled with reduced growth and significant inflation. The Central Bank of Egypt (CBE) implemented several polices with the aim of protecting the official value of the Egyptian pound, which was much higher than its actual value in the parallel unofficial market. The artificially high value of the Egyptian pound and the high volatility in the parallel market, coupled with various bottlenecks affecting foreign investor confidence in the repatriation of funds, resulted in much-reduced foreign investor appetite for investment in Egypt. Foreign investors were particularly reluctant to overpay for Egyptian pound-denominated assets and securities, and concerned about the availability of foreign currency to repatriate profits and exit proceeds.

A number of significant changes have occurred, starting with the CBE's decision to float the Egyptian pound on 3 November 2016 and followed by the International Monetary Fund (IMF) extending a US$12 billion facility to Egypt approved by the Executive Board of the IMF on 11 November 2016. Since then, the Egyptian pound has lost slightly more than 50 per cent of its value from the 8.88 Egyptian pound peg to the US dollar to around 18 Egyptian pounds per US dollar, and has relatively stabilised at this rate after a period of sharp fluctuations. In the meantime, the CBE finally lifted restrictions on foreign currency transfers on 14 June 2017.2 The conclusion of the IMF facility, the fair valuation of the Egyptian pound, the stabilisation of the foreign currency exchange rates, the increased availability of foreign currency, and the removal of various restrictions and bottlenecks affecting the repatriation of funds have all contributed to increased foreign investor confidence in the Egyptian economy.

The new exchange rate regime continued to increase foreign investor appetite for Egyptian assets. The net FDI inflows have been increasingly covering the current account deficit (excluding grants) since Q3 (2016), reducing the gap to US$0.1 billion during Q3 (2017), the lowest since Q1 (2013).3

The CBE has gradually increased interest rates in an effort to reduce inflation and 'dollarisation', raising the overnight deposit rate, the overnight lending rate and the rate of the CBE's main operation, as well as the discount rate, in July 2017, by 200 basis points to 18.75, 19.75 and 19.25 per cent, respectively. The higher interest rates were obviously increasing the cost of borrowing, with direct implications on many businesses reliant on borrowing to finance capital expenditure or working capital requirements, and with indirect effects on other businesses dependent on consumer financing (e.g., car loans in the automotive sector). However, recently this trend has been gradually reversed, with the overnight deposit rate, the overnight lending rate and the rate of the CBE's main operation, as well as the discount rate, being reduced to 16.75, 17.75 and 17.25 per cent, respectively, as of March 2018.

Real monetary conditions continued to tighten despite nominal policy rates being kept unchanged during Q3 and Q4 2017. The previous policy rate increases led to inflammatory pressures negatively affecting the disposable income of the very large Egyptian middle class, which has been one of the key drivers of growth in many consumer-spending driven sectors of the economy, most notably fast moving consumer goods (FMCGs).

The government, attempting to control the already high budget deficit, and now under more pressure due to the devaluation of the Egyptian pound and higher interest rates, has been gradually reducing energy and fuel subsidies, with the latest fuel subsidy reductions occurring on 28 June 2017 (Prime Ministerial Decrees 1435 to 1439 for 2017). More energy and fuel subsidy reductions are expected to occur during 2018. The reduction of those subsidies is also contributing to more inflation and more pressure on the disposable income of the middle class, which will undoubtedly in turn affect various businesses. Furthermore, higher energy and transport costs directly affect numerous businesses, requiring them to increase prices or reduce margins.

The inflationary impact of the domestic currency depreciation has diminished, and the monthly headline inflation registered minus 0.1 per cent and minus 0.2 per cent in January 2018 and December 2017, respectively. This follows the period between August and November 2017 at around 1.1 per cent, affected by upward adjustments of regulated prices, which accounted on average for 44 per cent of monthly headline inflation, due to subsidy reforms. The prices of regulated items contributed tremendously to headline inflation due to subsidy reforms related to hydrocarbons, electricity and water.4

On the macro level, those policies and measures have resulted in an overall surplus in the fiscal year 2016–2017 amounting to US$13.7 billion, as opposed to an overall deficit of US$2.8 billion in the previous fiscal year. This was mainly driven by a decline in imports and an increase in exports as a consequence of the Egyptian pound devaluation coupled with significant inflows of foreign portfolio investments, especially in Egyptian treasury bonds with considerably high yields.5 In the meantime, the considerable devaluation of the Egyptian pound has sharply increased the cost of imported finished goods and Egyptian products reliant on imported raw material, while significantly increasing the attractiveness of Egyptian exports of goods and potentially of services as well.

To summarise, the CBE and the government have been adopting several policies and measures simultaneously with the aim of reducing budget and trade deficits and attracting foreign direct investment (FDI). While this policy direction has indeed increased foreign investor confidence in the Egyptian economy, this has not necessarily translated into a significant increase in FDI (the total inflows of FDI in Egypt in July 2016 to March 2017 rose by only 12.1 per cent, mainly driven by investments in the oil sector).6 The main impediments to FDI growth remain political and policy matters, which are discussed in more detail in Section IV. With regard to M&A activity, these policies and measures affect almost all types of businesses across all sectors of the economy in different ways (mostly negatively, at least in the short-term; however, also positively in certain cases, such as exporters). As these changes are fairly recent and in many cases are actually still unfolding, many businesses are still digesting them and devising strategies to cope with or benefit from them. As such, it is extremely difficult at this stage to devise business plans and budgets, or to come up with reasonably confident projections or forecasts, which is consequently making the valuation of businesses for the purposes of various types of M&A exceedingly difficult.

Therefore, in spite of the fact that the Egyptian economy remains fundamentally attractive due at least to its sheer size and depth, and even though the recent policy direction of the CBE and the government is restoring foreign investor confidence in the economy, the level of M&A activity is still lower than its level before 2011, and its level during the brief period of relative political and economic stability and optimism immediately following the presidential elections of 2012.

ii GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

The Egyptian legal system is strongly influenced both by the French civil code and Islamic shariah, and is based on legal codification with judicial precedents playing a less important role compared to common law jurisdictions. The Civil Code7 is the main pillar of the Egyptian legal system. It codifies contract law and governs all types of sale and purchase transactions. Therefore, all M&A transactions governed by Egyptian law are mainly regulated by the Civil Code.

Furthermore, there are numerous specific codes addressing specific areas of law. The Commercial Code8 complements the Civil Code with regards to certain areas of commercial and corporate law. The main codes relevant to M&A are the Companies Law9 and its Executive Regulations, which govern corporate matters in relation to joint-stock and limited liability companies, and the Capital Market Law10 and its Executive Regulations, which address several important corporate matters (including, without limitation, capital increases of joint-stock companies, public offerings of securities and takeover rules pertaining to publicly listed companies). The Listing Rules of the Egyptian Exchange (EGX), issued pursuant to Decree No. 11 of 2014 of the Board of Directors of the Financial Regulatory Authority (FRA), regulate the listing, delisting and disclosure requirements of securities on the EGX, and are consequently relevant to transactions involving listed companies, whether as targets or parties. The Central Securities Depository and Registry Law11 and its Executive Regulations regulate the central depository and registry of dematerialised securities, and the clearing and settlement of listed securities. In addition, specific laws include provisions that impact M&A transactions in the sectors they regulate (e.g., the Central Bank and Banking Law12 regulating acquisitions in the banking sector). Finally, the new Investment Law,13 cancelling and superseding the old Investment Law,14 regulates various investor incentives and guarantees as well as specific investment regimes and procedures, and complements the Companies Law with regards to certain areas of corporate law.

The Egyptian regular court system consists of three tiers: the courts of first instance, courts of appeal and the Court of Cassation. Civil and commercial disputes are heard before regular courts. The Council of State, consisting of two tiers of administrative courts, the Administrative Court and the High Administrative Court, decides over administrative disputes relating to administrative contracts and decisions issued by the different branches of the administration. In addition, Law No. 120 of 2008 has established specialised economic courts, which are specialised circuits within the regular court system, with the aim of expediting the settlement of commercial and investment disputes. In spite of the relative success of the specialised economic courts compared to the regular courts in terms of the expedited settlement of disputes, it is very common for M&A transaction documents to refer potential disputes to arbitration. In light of the provisions of the Arbitration Law,15 and based on the fact that Egypt is a signatory of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958), arbitral awards are enforceable in Egypt subject to a few relaxed conditions, and are not subject to review on their merits. Furthermore, it should be noted that it is also quite common in cross-border M&A transactions involving foreign investors that the parties agree on an applicable law other than Egyptian law (English law in particular). This is particularly the case as the Egyptian legal system respects party autonomy to a very large extent (except in very few instances, such as technology transfers and local commercial agency termination), as the parties are free to agree on the applicable law and jurisdiction, and their agreement will be upheld by local courts as long as it does not violate public policy or mandatory legal standards. In such case, the contractual obligations of the parties are governed by foreign law (e.g., English law); however, corporate matters are still regulated by the relevant Egyptian laws and regulations to the extent an Egyptian target is involved.

iii DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW
AND THEIR IMPACT

The past couple of years have witnessed numerous legal developments, the most notable being the passing of the new Investment Law, the Value Added Tax Law16 and the Bankruptcy Law,17 which have cancelled and superseded their predecessors, as well as the passing of the Movable Securities Law18 and its Executive Regulations. Furthermore, amendments to the Companies Law and its Executive Regulations were promulgated to enhance and improve Egyptian corporate law and introduce the sole person company (that is also known as a sole proprietorship).

The key amendment of the Companies Law and its Executive Regulations is the introduction of the sole person company, which allows the incorporation of an Egyptian company fully owned by a natural person or a juristic person. This new corporate vehicle was introduced to encourage more investment in small and medium-sized enterprises (SMEs) and also facilitate corporate structuring. Another important amendment is allowing the introduction of preferred shares post-incorporation, which was previously prohibited. One very important amendment is the permitting of the conclusion of a shareholders' agreement that, if approved by the extraordinary general assembly of shareholders of the company, is binding both on the company and minority shareholders. This amendment has wide implications on the regulation of corporate governance and shareholder relations in Egyptian joint-stock companies. Finally, another notable amendment is the introduction of comprehensive demerger procedures, which were not previously set out in this detailed and properly regulated manner. This amendment will undoubtedly facilitate corporate structuring procedures.

With regards to the new Bankruptcy Law, one of the crucial factors that made Egypt a 'high risk environment' for investment is the bankruptcy legal framework, which was tainted by bureaucracy and lengthy, complicated procedures. The new Bankruptcy Law intends to mitigate the associated risks of doing business in Egypt through creating a friendlier and less intimidating business environment for struggling or risk-taking investors. First, the current regulations no longer deal with the bankrupt person as a criminal. The new Bankruptcy Law introduces new mechanics such as reorganisation to create a win–win situation for all the concerned parties in a bankruptcy process. In addition, it mitigates the imprisonment penalties imposed on non-fraudulent bankrupt persons to encourage risk-taking investors to do businesses in Egypt. Second, the new Bankruptcy Law introduces comprehensive reorganisation procedures entailing the continuation of a business and facilitating bankruptcy procedures through the intervention of the competent court. The involvement of the court aims to put in place an efficient and adequate reorganisation plan with a detailed timeline for the purpose of assisting debtors and their creditors to achieve the reorganisation. Third, the new Bankruptcy Law allows debtors to file for bankruptcy while still operating their business during the negotiation period. This new philosophy does not aim to penalise struggling businesses, but rather to assist them to get back on the right track.

The Movable Securities Law and its Executive Regulations have been issued to close a loophole in the Egyptian debt market where the availability of collateral was a constraint for SMEs requiring financing. The FRA has established an electronic registry with the purpose of the registration of movables, which may be used as collateral (including existing or future physical assets or moral rights, receivables, credit notes, bank deposits or accounts, equipment, tools, stock, trees and agricultural products). This Register is also used to indicate the existence of a security interest over a movable asset and for prioritising creditors. This system is far more flexible. Creditors no longer need to hold possession of the movable asset used as collateral, as required under the previous Civil Law regime. This allows the debtor to use the movable asset while it is securing the debt. Furthermore, any party having a legitimate interest over the movable asset may object to the registration before the courts on an urgent basis. In an insolvency event, movables subject to the registered collateral will not be part of the debtor's assets. Creditor ranks will apply; however, the registration of the collateral will grant the secured creditor a first-ranking security over the movable asset. The Movable Securities Law allows creditors to directly recover their debt or directly sell the pledged movables without a court order as well as direct set-off in the case of bank accounts.

Other recent legal developments with the most significant impact on M&A transactions are far less publicised. First, the Importers Register Law19 was amended to allow foreign ownership of up to 49 per cent in Egyptian companies registered on the Importers Register (a requirement for importing finished products), which was previously completely prohibited. Second, a new Chapter 13 was added to the Executive Regulations of the Capital Market Law stipulating rules regarding the disclosure of information pertaining to the ultimate beneficial owners (UBOs) of Egyptian joint-stock companies. This is a novel and important legal development in the Egyptian market, as the concept of UBOs and monitoring who they are were never regulated in this level of detail previously. The disclosure requirements are extensive and substantial, and apply to all instances of incorporations as well as any major transactions and restructuring exercises involving Egyptian joint-stock companies. This development, coupled with the introduction of the general anti-avoidance rule (GAAR) to the Income Tax Law and the restrictions on non-cash share transfer transactions, all make 'offshoring', a very common practice by Egyptian sellers with the purpose of avoiding tax (and, during the foreign currency shortages, for receiving foreign currency abroad), both more difficult to achieve and easier to trace and combat. Third, the board of directors of the FRA issued Decree No. 17 of 201720 regulating over-the-counter transactions implemented through the Egyptian Exchange (EGX) (i.e., in relation to shares that are not listed on the EGX). The new regulations prohibit non-cash settlement with very few exceptions, which not only has significant implications on 'offshoring' as explained above, but also makes numerous pre-transaction restructuring processes as well as escrow arrangements, which are very commonplace in M&A transactions, exceedingly difficult. In addition, the new regulations include restrictions on the backdating of buy and sell orders. This also makes many escrow and closing arrangements common in M&A transactions very difficult to implement. Fourth, the Executive Regulations of the Capital Market Law were amended followed by the issuance of a decree by the board of directors of the FRA to require the prior approval of the FRA for the acquisition, directly or indirectly, of more than one-third of the capital of brokerage companies or fund management companies with a market share greater than 10 per cent. Decree No. 135 of 2016 stipulates the procedures and criteria required to be granted FRA approval.

iv FOREIGN INVOLVEMENT IN M&A TRANSACTIONS

The policies and measures to attract FDI and increase foreign investor confidence adopted by the CBE and the government have not yet translated into a significant increase in FDI or foreign involvement in M&A transactions. Foreign investors are certainly viewing the policy developments unfolding in Egypt favourably. In particular, with the Egyptian pound losing more than 50 per cent of its value, Egyptian assets and securities are now available at attractive prices.

Nevertheless, there are a number of factors that still reduce the attractiveness of Egypt to foreign investors. First, political turmoil and security concerns in Egypt and throughout the Middle East and North Africa reduce investor appetite. Second, the increased economic role of the military is raising concerns for local as well as foreign investors. Third, in spite of serious efforts to improve the legal framework for investment in Egypt, including most notably the issuance of the new Investment Law, low-level bureaucratic bottlenecks are still stifling real progress on the ground, and only time can tell whether true and meaningful change will occur from the bottom up.

Traditionally, key players in M&A transactions taking place in Egypt are either from the Gulf (the United Arab Emirates, Saudi Arabia and Kuwait, and previously Qatar, which is now largely out of the picture for political reasons) or the West (the United States or Europe). This trend is continuing to a very large extent. However, recently investors from China and South Africa are becoming visible in the Egyptian market as well.

v SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

Owing to the political and economic uncertainties that have adversely affected Egyptian businesses since the January 2011 Revolution, and which continue to affect them, most M&A activity in the past few years has been focused on the defensive sectors with rather stable levels of demand (e.g., health, education and FMCGs). Healthcare and education continue to drive the trend in M&A activity. A significant education transaction this year was EFG Hermes acquiring a portfolio of schools valued at 1 billion Egyptian pounds from Talaat Mostafa Group. The schools will be managed and operated by GEMS, an Emirati education provider. While health and education continue to perform, solar energy has also become sought after in the M&A market as Egypt's feed-in tariff programme has incentivised many financial investors to consider the solar energy sector. Major transactions this year have also taken place in the telecommunications and oil and gas sectors. In May of this year, Telecom Egypt signed a US$90 million transaction to acquire 100 per cent of Orascom Telecom, Media and Technology Holding's subsidiary MENA Cables, a company licensed to own and operate a submarine cable system that connects Europe to the Middle East and South Asia. On the other hand, Eni Petroleum has sold 10 per cent of its stake in Egypt's Zohr Gas Field to Mubadala Petroleum in a transaction valued at US$934 million.

vi FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

The main source of financing M&A in Egypt is equity, whether self-financing in the case of strategic investors, or capital-raising through various types of private equity funds or investment vehicles (onshore or offshore) in the case of financial investors. Debt financing is rather challenging to obtain in the context of M&A.

First, leveraged buyouts involving debt push down to the target face several complexities. On the one hand, upstreaming dividends requires adequate profits or retained earnings permitting the required distribution, while dividends are now subject to withholding tax at a rate of 5 or 10 per cent, as applicable (see Section VIII). On the other, using the target company to guarantee the loan obtained by the acquirer or lend to the acquirer is expressly prohibited under the Companies Law where the acquirer is a board member of the target company, and in the absence of an explicit prohibition (i.e., even if the acquirer is not a board member) still raises legal questions under Egyptian law (especially where minorities or other creditors exist) due to being prejudicial to the corporate interest of the target company. Therefore, more often than not, the elegant solution is to set up an acquisition vehicle and merge it with the target company, a process that is not without its complexities from the legal, tax and accounting perspectives.

Second, due to the recent issues regarding the availability of foreign currency, restrictions on transfers of foreign currency and fluctuations in foreign currency exchange rates, foreign lenders are difficult to attract to the Egyptian market, at least at this stage, perhaps except in the case of targets with considerable foreign currency income.

Third, local banks are subject to restrictions imposed by the CBE on granting acquisition financing. Those restrictions include, most notably, requiring prior CBE approval in the event local banks consider financing more than 50 per cent of an acquisition transaction (excluding letters of guarantee in the context of mandatory tender offers on listed securities). In addition, the CBE imposes restrictions on the percentage of acquisition financing in a bank's loan portfolio, and the percentage of financing granted to a single client and its related parties. Furthermore, the CBE's directives include requirements with regard to due diligence and valuation, as well as criteria for increasing the risk-weighted credit exposures related to acquisition financing for the purpose of calculating capital adequacy requirements.

vii EMPLOYMENT LAW

Employment matters are regulated in Egypt by the Labour Law.21 In the context of equity-based M&A transactions, employment matters are pretty straightforward. In the case of an acquisition, the rights and obligations of employees and employers remain unaffected. In the case of a merger, employees are automatically transferred to the employment of the surviving entity with the same rights and obligations. However, employment matters are extremely complex in the context of asset or business transfers, as Egyptian law is based on the philosophy of freedom of employment. Accordingly, employees cannot be transferred against their wishes as part of an asset or business sale. This requires them to resign from the employment of the previous employer (the seller) and to enter into a new employment relationship with the new employer (the buyer). This is a particularly tricky process, as it is individualised for each employee, and because employees are very reluctant to relinquish accrued rights from their previous employment (in particular, rights to adequate compensation based on the length of their employment in the case of unjustified dismissal). As such, this aspect complicates asset and business transfers in Egypt, especially where the number of employees is significant, and even more so where the average period of their employment is relatively high.

viii TAX LAW

The Income Tax Law22 was issued on the basis of simplifying the tax regime and reducing the applicable tax rate (the corporate tax rate was reduced to 20 per cent) to incentivise reporting and improve collection rates. This has actually proved very successful. However, following the January 2011 Revolution and increasing budget deficits, successive changes have been introduced into the Egyptian income tax regime.

In 2011, the corporate tax rate remained at 20 per cent for the first 10 million Egyptian pounds, and an additional tranche above 10 million Egyptian pounds was introduced with an applicable rate of 25 per cent. In 2012, the corporate tax rate was increased to 25 per cent across the board. In 2014, a surtax of 5 per cent was added to income in excess of 1 million Egyptian pounds applicable for a three-year interim period. Finally, in 2015, the corporate tax rate was reduced to 22.5 per cent, and the 5 per cent surtax became applicable for one year only.

Dividend income was not previously taxable in Egypt. However, an amendment introduced in 2014 subjected dividend income (excluding stock dividends) to taxation at a rate of 10 per cent, reduced to 5 per cent in the case of holdings of more than 25 per cent of the capital for a period of at least two years. This dividend withholding tax is applicable on all types of Egyptian companies and is applicable on resident as well as non-resident holders.

Furthermore, capital gains realised from the sale of shares of Egyptian companies (excluding companies whose shares are listed on the EGX) by resident companies are taxable. In addition, as of the 2014 amendment, capital gains realised by resident individuals from the sale of shares of Egyptian companies (excluding companies whose shares are listed on the EGX) are also explicitly taxable (previously, the common interpretation was that, for resident individuals to be subject to such capital gains taxes, they should be professionally involved in the trading of shares, i.e., not merely engaged in a one-off transaction). The capital gains realised by non-residents from the sale of shares of Egyptian companies (excluding companies whose shares are listed on the EGX) are also taxable.

As for the capital gains realised from the sale of Egyptian shares listed on the EGX, a major development in 2014 was their being subjected to taxation at a rate of 10 per cent, which was applicable on both resident and non-resident corporations and individuals (these capital gains had been exempt from taxation until that amendment came into force). This change was met with huge resistance from investors and brokerage companies, and the application of taxes on those capital gains was suspended for a two-year period starting on 17 May 2015. This suspension was recently extended for an additional three years, ending on 17 May 2020.

In this regard, double tax treaties can serve to reduce or eliminate the taxes on non-residents in respect of capital gains and dividend income. Therefore, in recent years it has been quite common for foreign and Egyptian investors to utilise vehicles established in treaty jurisdictions with the purpose of avoiding those types of taxes. It is worth noting that the amendments introduced in 2014 included the stipulation of a GAAR under Article 92-bis of the Income Tax Law. Furthermore, Egypt has very recently signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting.23

In the meantime, in parallel to the suspension of the application of taxes on the capital gains on listed shares, a stamp tax was imposed on the trading of securities, whether listed or not, at a rate of 1.25 per mille, borne by both the buyer and the seller, until 31 May 2018, to be raised to 1.5 per mille until 31 May 2019 and to 1.75 per mille as of 1 June 2019. The rate is increased to 3 per mille, borne by both the buyer and the seller, in the case of the acquisition of 33 per cent or more of capital in a single transaction or group of related transactions in a two-year period. It should be noted that a stamp tax was imposed in 2013 on the trading of securities, which was abolished in 2014 in conjunction with imposing taxes on the capital gains on listed shares for the first time.

Finally, a major development in the Egyptian tax regime, albeit not directly relevant to M&A activity, was the enactment of the Value Added Tax Law, which cancelled and superseded the old Sales Tax Law.24

ix COMPETITION LAW

The Competition Protection Law25 and its Executive Regulations require that the Competition Protection Authority be notified within 30 days of the conclusion of any merger or acquisition transaction in the event that the annual turnover of the relevant person (or persons) as per the latest financial statements is in excess of 100 million Egyptian pounds. The relevant provisions of the Competition Law and its Executive Regulations are somewhat conflicting and confusing in terms of specifying how the threshold referred to above should be calculated, and whether it is limited to turnover in the Egyptian market or should be applied globally. This obviously raises practical complications with respect to major multijurisdictional M&A transactions involving large multinational corporations with huge global turnover and limited presence in the Egyptian market. The conservative approach is to notify the Competition Protection Authority in those cases notwithstanding low turnover levels in the Egyptian market.

It should be noted that the penalties for a breach of the above notification requirement or for providing incorrect information to the Competition Protection Authority are insignificant fines. However, the change of the notification requirement to a pre-approval by the Authority is currently under discussion.

x OUTLOOK

Looking ahead, it is evident that the CBE and the government are devising policies aimed at reducing budget and trade deficits, increasing foreign investor confidence in the Egyptian economy and consequently attracting FDI. It remains to be seen whether these policies will actually succeed in convincing investors to make long-term investments in the Egyptian economy in spite of security concerns, the current political environment and historical complaints regarding the difficulty of doing business in Egypt.

In addition, the policies are strongly reshaping the Egyptian economy and changing fundamentals for almost all Egyptian businesses. The coming year, much like the year before, will be a period of adjustment and learning, and the expectation is that M&A activity will truly pick up following this period when investors, potential buyers and potential sellers have more visibility both on the macro and micro levels. During this interim transitional period, the expectation is for M&A activity to continue leaning towards defensive sectors and distressed assets that could be acquired at attractive valuations, especially in light of the Egyptian pound devaluation.


Footnotes

1 Mohamed Gabr is partner and Ingy Darwish and Engy ElKady are associates at Al Tamimi & Co.

3 CBE Monetary Policy Report, December 2017.

4 Ibid.

6 Ibid.

7 No. 131 of 1948.

8 No. 17 of 1999.

9 No. 159 of 1981.

10 No. 95 of 1992.

11 No. 93 of 2000.

12 No. 88 of 2003.

13 No. 72 of 2017.

14 No. 8 of 1997.

15 No. 27 of 1994.

16 No. 67 of 2016.

17 No. 11 of 2018.

18 No. 115 of 2015.

19 No. 121 of 1982.

20 The Egyptian Financial Supervisory Authority issued Decree No. 94 of 2018, cancelling and superseding Decree No. 17 of 2017; however, the new regime does not introduce significant amendments to the old regim. The non-cash settlement remains prohibited under the new regulations, subject to exceptions approved by the FRA.

21 No. 12 of 2003.

22 No. 91 of 2005.

24 No. 11 of 1991.

25 No. 3 of 2005.