Private equity plays a key role in economic growth by providing capital, enabling restructuring, and supporting business expansion across key industries. In the UAE and the GCC region, private equity investments have contributed to economic diversification and advancing national initiatives such as UAE Vision 2031.
However, the success of private equity transactions depends on careful due diligence, stringent governance, and effective risk management to ensure long-term sustainability.
Private equity provides the necessary capital for businesses to scale, innovate, and enhance operational efficiencies. In the UAE, sectors such as technology, healthcare, infrastructure, and real estate have witnessed significant private equity-driven growth. The UAE’s investor-friendly policies, including tax incentives in free zones, efficient regulations, and strong legal frameworks, have solidified its position as a preferred destination for private capital.
However, for private equity investments to generate or produce positive outcomes, stringent housekeeping is essential, including robust due diligence, regulatory compliance, correct financial reporting, and efficient governance structures.
Due diligence is the foundation—the basis of any private equity transaction—because it ensures that investors accurately assess financial records, compliance with UAE corporate laws, and hidden liabilities. Insufficient due diligence can lead to inflated valuations and legal disputes that could ruin investment value.
Equally important is corporate governance, which directly impacts investor confidence and business sustainability. Strong governance frameworks mitigate risks related to fraud, mismanagement, and conflict of interest. That is why the UAE’s corporate governance standards, enforced by regulatory bodies such as the Dubai Financial Services Authority (DFSA) and the Security and Commodities Authority (SCA), enhance transparency and accountability, and this ensures that private equity-backed firms operate with integrity and honesty.
Despite its potential, private equity comes with significant risks. The Abraaj scandal in 2018 serves as an important reminder of the consequences of poor governance and regulatory oversight. Once a leading firm in the region, Abraaj collapsed due to fund misuse and mismanagement of investor capital. This led to financial losses for investors, and loss of credibility of the private equity industry in the region. In response, UAE regulators introduced a series of stricter governance measures that included enhanced due diligence requirements, independent audits, and tighter fund governance standards. Such reforms were designed to restore investor confidence and to make sure that similar failures would be prevented in the future.
Another major concern in the sector is the market dominance of private equity-backed firms, which can create monopolistic tendencies. Recognising this risk, the UAE enacted the New Competition Law in 2023, to prevent anti-competitive practices. The law grants regulators the authority to review mergers and acquisitions, ensuring that they do not create unfair market advantages and harm competition.
To mitigate these risks, investors and firms must adopt comprehensive compliance measures, risk diversification strategies, and legal protections in contracts. To further protect investments and promote ethical business practices, ensuring regulatory alignment and conducting third party audits are possible solutions.
The UAE’s private equity landscape is evolving, as shown by large-scale acquisitions and high-profile transactions that have shaped the market. Despite the 2018 setback, the private equity market in the UAE continues to demonstrate resilience and dynamism.
For example, in the logistics sector, Abu Dhabi’s sovereign wealth fund, ADQ, made a significant move by acquiring a majority stake in a leading logistics company, Aramex. This consolidation aims to enhance logistics capabilities and aligns with the UAE’s vision to become a global logistics hub. In parallel, Mubadala Capital, the asset management of Abu Dhabi’s sovereign wealth fund, has raised $3.1 billion for its latest private equity fund. This shows that the private equity industry is still active, and growing.
On the other hand, the Abu Dhabi National Oil Company (ADNOC) established XRG, an investment company focusing on international gas, chemicals, and low-carbon energy investments. XRG aims to double its asset value in the next decade, signalling a major commitment to diversification in the energy sector. The real estate sector has also witnessed major investments, such as Modon Holding’s (then Q Holding’s) multi-billion-dollar acquisition of a prominent real estate developer. These high-profile transactions signal that, even in the wake of past challenges, the UAE and the broader region remain an appealing destination for private equity investments.
Private equity continues to be a force in the UAE’s economic landscape, but accurate due diligence and adherence to corporate governance and risk mitigation are essential for sustainable success. All in all, the UAE and the broader region are a prime destination for private equity, set against a dynamic regulatory environment.
Michael Kortbawi is a senior partner and co-founder at BSA Law, based in Dubai.
