Mergers & Acquisitions

Mergers & Acquisitions in Pakistan

Buying a company is not the same as buying its assets.

Buying 60% of a company is not the same as buying 100%.

A merger through a statutory scheme is different again.

Each structure changes what the buyer acquires, what liabilities remain, what approvals are required and what documents need to be signed.

Sindh Lawyer provides legal support for mergers and acquisitions in Pakistan, including share acquisitions, asset acquisitions, mergers, schemes of arrangement, corporate reorganizations, legal due diligence, transaction documents, regulatory approvals and closing.

We advise buyers, sellers, founders, shareholders, investors and companies throughout the transaction lifecycle.

The first question in an M&A transaction is therefore not:

“Which agreement do we need?”

It is:

“What are we actually buying or combining, and what is the safest legal structure for achieving it?”

Share Purchase or Asset Purchase?

This decision can fundamentally change the transaction.

Share Acquisition

In a share acquisition, the buyer acquires shares in the target company.

The company continues to own its:

• assets;
• contracts;
• employees;
• licences;
• receivables;
• intellectual property; and
• liabilities,

subject to applicable law and contractual arrangements.

The buyer therefore acquires an interest in the existing corporate entity, including exposure to risks that may already exist within it.

Asset Acquisition

In an asset transaction, the buyer acquires identified assets or a business rather than necessarily acquiring the target company's shares.

Depending on the deal, this may include:

• land;
• equipment;
• inventory;
• intellectual property;
• customer contracts;
• business operations;
• licences where transferable;
• receivables; or
• particular business divisions.

An asset acquisition can provide greater control over what is purchased, but transferring each asset, contract, employee or licence may require separate legal steps.

The transaction should therefore be structured before definitive documents are drafted.

M&A Legal Due Diligence

Due diligence answers a simple but critical question:

What legal risks will the buyer inherit if the transaction closes?

The review should be proportionate to the company and transaction.

Depending on the target, we may examine:

Corporate

• incorporation;
• Memorandum and Articles;
• shareholding;
• share issuances;
• directors;
• corporate filings;
• beneficial ownership;
• resolutions; and
• statutory records.

Material Contracts

• customer agreements;
• supplier agreements;
• distribution;
• franchise arrangements;
• leases;
• financing documents;
• joint ventures;
• licences;
• technology contracts; and
• change-of-control clauses.

Employment

• key employees;
• employment contracts;
• benefits;
• pending disputes;
• termination exposure; and
• management retention.

Intellectual Property

• trademarks;
• software ownership;
• copyright;
• patents;
• licences;
• domain names;
• employee/contractor IP assignments; and
• infringement disputes.

Property

• ownership;
• leases;
• mortgages;
• charges;
• possession;
• material property disputes; and
• development rights.

Litigation & Regulatory Matters

• pending cases;
• notices;
• investigations;
• regulator correspondence;
• fines;
• licences;
• compliance deficiencies; and
• threatened disputes.

Financing & Security

• loans;
• guarantees;
• charges;
• security documents;
• repayment terms;
• defaults; and
• lender consent requirements.

Legal due diligence should not simply produce a list of documents reviewed.

It should tell the buyer:

What is the risk? How serious is it? Can it be fixed before closing? Should it affect price, indemnity or the decision to proceed?

Seller-Side Due Diligence

Sellers can also benefit from reviewing the business before buyers receive access.

A seller-side review may identify:

• missing corporate filings;
• unsigned contracts;
• inconsistent share records;
• unresolved employee issues;
• unregistered IP;
• expired licences;
• undisclosed litigation; or
• deficiencies likely to delay the deal.

Correcting these issues before formal due diligence can make the transaction cleaner and reduce bargaining leverage available to the buyer later.

NDA and Confidentiality Before Due Diligence

M&A discussions involve sensitive information.

Before sharing financial, commercial or technical information, parties often enter into a confidentiality or non-disclosure agreement.

It may address:

• permitted purpose;
• confidentiality;
• recipients;
• advisors;
• employee disclosure;
• competitive information;
• non-solicitation where appropriate;
• return/destruction of information;
• duration; and
• consequences of unauthorized disclosure.

For strategic competitors, information sharing should also be controlled carefully from a competition-law perspective.

Term Sheets & Letters of Intent

A term sheet or Letter of Intent can help establish the commercial framework before the parties spend substantial time on due diligence and definitive agreements.

Typical issues include:

• proposed valuation;
• transaction structure;
• percentage being acquired;
• payment;
• exclusivity;
• due diligence;
• conditions;
• timeline;
• management arrangements;
• confidentiality; and
• intended closing.

It should also state clearly which provisions are binding and which are not.

A poorly drafted “non-binding” document can still create disputes over whether particular obligations were intended to be enforceable.

Share Purchase Agreements

A Share Purchase Agreement, or SPA, is often the core document in a private-company acquisition.

Depending on the transaction, it may address:

• shares being sold;
• purchase price;
• payment mechanics;
• conditions precedent;
• completion;
• warranties;
• representations;
• indemnities;
• limitations of liability;
• tax matters;
• employee issues;
• restrictive covenants;
• confidentiality;
• dispute resolution; and
• post-closing obligations.

The agreement should reflect what due diligence actually found.

The SPA should not be drafted as though the target is risk-free if the buyer has already identified material problems.

Asset Purchase Agreements

An asset purchase agreement should precisely identify what is being acquired.

The schedule may need to distinguish:

Included assets

from

Excluded assets

and:

Assumed liabilities

from

Retained liabilities.

This can be particularly important where the seller has legacy debts, litigation or other liabilities the buyer does not intend to assume.

Transfers of contracts, property, licences and employees may also require separate consents or documentation.

Purchase Price & Payment Structure

The purchase price does not always consist of one payment made on closing.

M&A consideration may involve:

• fixed price;
• completion accounts;
• locked-box mechanism;
• deferred consideration;
• earn-out;
• escrow;
• holdback;
• seller financing;
• shares/securities; or
• another negotiated structure.

Each method changes risk allocation.

For example, an earn-out can bridge disagreements about future value but may create disputes over how the business is operated after closing.

The legal documents should therefore define the calculation and decision-making mechanics carefully.

Warranties & Representations

A buyer cannot realistically investigate every fact about a company.

Seller warranties help allocate the risk of unknown or inaccurate information.

They may cover:

• corporate authority;
• share ownership;
• accounts;
• taxes;
• litigation;
• employees;
• intellectual property;
• property;
• contracts;
• compliance;
• licences;
• data;
• environmental issues; and
• undisclosed liabilities.

Warranties should reflect the actual transaction rather than being copied from a foreign precedent containing irrelevant provisions.

Disclosure Letter

The disclosure process is where the seller qualifies warranties by identifying exceptions.

For example, if the SPA states:

“The Company is not involved in litigation”

but a particular case is pending, the seller may disclose that proceeding properly rather than leave the warranty inaccurate.

A disclosure exercise should be specific and organized.

Dumping thousands of documents into a data room does not automatically create effective legal disclosure.

Indemnities

Indemnities may be used for identified risks that the parties want to allocate specifically.

Examples may include:

• historic tax exposure;
• identified litigation;
• regulatory liability;
• employee claims;
• environmental issues;
• IP disputes; or
• another known exposure.

An indemnity should clearly define:

• covered loss;
• responsible party;
• limits;
• duration;
• claim procedure; and
• interaction with other remedies.

Conditions Precedent

Some matters must be completed before closing.

Conditions precedent can include:

• shareholder approval;
• board approval;
• lender consent;
• regulator approval;
• competition clearance;
• transfer consent;
• licence approval;
• restructuring;
• release of security;
• completion of specified remediation; or
• another negotiated requirement.

The agreement should identify who is responsible for satisfying each condition and by when.

Regulatory Approvals

M&A transactions in Pakistan can require several different approvals depending on the target and transaction.

Potential regulators can include:

• SECP;
• Competition Commission of Pakistan;
• sector regulators;
• lenders;
• licensing bodies;
• government departments; or
• other authorities.

Regulatory analysis should therefore begin early.

A transaction should not reach signing before the parties first discover that closing requires an approval that may take significant time.

Pakistan Merger Control

Competition clearance is a separate question from corporate approval.

The Competition Act, 2010 and Competition (Merger Control) Regulations, 2016 establish Pakistan's merger-control regime.

CCP's current guidance confirms that qualifying transactions require a pre-merger application under section 11, and the filing requires information including transaction details, relevant markets, market shares, ownership structure and group activities.

The current regulations establish thresholds involving assets, turnover, transaction value and, for share acquisitions, voting rights. For example, the regulations include a more-than-10% voting-share threshold as one of the criteria within the notification framework, together with financial thresholds that must be considered in combination.

A transaction should therefore be screened for competition filing requirements before completion.

Competition Issues Beyond Filing

Even where filing is required, the analysis does not end with submitting the form.

CCP may consider whether the transaction substantially reduces competition in a relevant market.

This can involve:

• horizontal overlap;
• vertical relationships;
• market shares;
• competitors;
• customer alternatives;
• barriers to entry;
• concentration;
• control; and
• post-merger market structure.

For detailed competition work, internally link this page to Competition & Antitrust Law.

Statutory Mergers & Schemes of Arrangement

A corporate merger through a statutory scheme is different from one shareholder simply selling shares to another.

SECP's current guidance confirms that sections 279 to 285 of the Companies Act, 2017 govern compromises, arrangements, reconstruction, mergers and amalgamations. A Scheme of Arrangement can cover mergers, demergers, restructurings or similar reorganizations and becomes binding following the required approvals and sanction.

The scheme can address matters such as:

• transfer of assets and liabilities;
• share exchange;
• treatment of members;
• creditors;
• restructuring;
• consideration;
• effective date; and
• implementation.

Court or SECP Jurisdiction for Schemes

Not every scheme follows the same approval route.

SECP's current 2025 merger FAQs state that schemes involving companies that are neither qualifying small-sized companies nor specified federal public-sector companies generally proceed before the relevant Company Bench of the High Court under sections 279–283.

For qualifying small-sized companies and specified federal public-sector companies, an application may be made directly to SECP under the applicable Companies Act framework.

This distinction should be checked against the company classifications applicable at the time of the transaction.

Merger Valuation & Share Swap

A statutory merger frequently requires valuation work.

SECP's current merger guidance identifies valuation and certification of the share-swap ratio as part of the merger process.

Legal counsel and valuation advisors therefore perform different functions.

The financial expert determines value or swap methodology.

The lawyer ensures the transaction documents and approval process properly reflect the proposed merger terms.

Listed Company Acquisitions & Takeovers

Acquiring significant voting rights in a listed company requires a specialized securities-law analysis.

Pakistan maintains the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017, updated by SECP through January 2024.

SECP explains that the takeover framework requires a public offer to minority shareholders in circumstances covered by the Regulations, with pricing and procedural requirements designed to give minority shareholders an exit opportunity when control changes.

A listed-company transaction should therefore not be documented as if it were an ordinary private-company share purchase.

Acquisition of Minority Stakes

Not every acquisition gives the buyer control.

An investor may acquire:

• 10%;
• 20%;
• 30%;
• another minority position; or
• a strategic stake with negotiated governance rights.

The legal documentation may need to address:

• board representation;
• reserved matters;
• information rights;
• vetoes;
• pre-emption;
• future funding;
• transfer restrictions;
• tag-along rights;
• drag-along rights;
• exit;
• anti-dilution; and
• deadlock.

The shareholder agreement may be as important as the share purchase agreement.

Majority & Control Acquisitions

Where the buyer obtains control, additional issues arise.

These can include:

• management transition;
• board changes;
• banking authority;
• key employees;
• customer notification;
• licences;
• change-of-control consents;
• supplier relationships;
• integration planning; and
• beneficial ownership updates.

Control should therefore be understood operationally, not simply as a percentage on a share certificate.

Founder and Shareholder Exits

Many private acquisitions involve founders rather than institutional sellers.

Founder exits can raise personal and commercial issues such as:

• retention;
• consultancy;
• earn-out;
• continued equity;
• non-compete provisions;
• non-solicitation;
• intellectual property;
• employment;
• warranties;
• personal indemnities; and
• release from guarantees.

The founder's sale agreement and post-closing role should be negotiated together.

Management Retention

A buyer may be purchasing a company partly because of its management team.

The transaction may therefore include:

• retention bonuses;
• new employment terms;
• incentive arrangements;
• equity participation;
• earn-outs;
• management warranties; or
• transition obligations.

Employment and M&A documents should be coordinated.

Change-of-Control Clauses

One of the most frequently overlooked due diligence issues is whether important contracts can terminate after an acquisition.

A customer, lender, landlord, licensor or supplier may have a contractual right to:

• consent;
• terminate;
• renegotiate; or
• accelerate obligations

if ownership or control changes.

These clauses should be identified before the transaction is announced.

Financing an Acquisition

A buyer may use:

• existing cash;
• equity;
• shareholder loans;
• bank finance;
• acquisition finance;
• seller financing; or
• a combination.

Financing documents can create additional conditions to closing.

The acquisition and financing timelines should therefore be coordinated.

For detailed finance work, internally link to Banking & Finance Law.

Tax Structuring

Tax can materially affect whether parties prefer a share sale, asset sale or another structure.

However, transaction documents should not make simplistic claims about tax consequences.

The exact treatment can depend on:

• seller;
• buyer;
• asset;
• corporate structure;
• consideration;
• residence;
• withholding;
• capital gains;
• indirect taxes; and
• applicable exemptions.

Tax structuring should be reviewed with qualified tax advisors before the parties lock in the commercial structure.

Foreign Investors & Cross-Border M&A

A foreign buyer acquiring a Pakistani business may need additional analysis concerning:

• investment structure;
• foreign ownership;
• company law;
• banking;
• foreign exchange;
• repatriation;
• sector restrictions;
• competition clearance;
• beneficial ownership;
• tax; and
• regulatory approvals.

Likewise, Pakistani businesses acquiring foreign targets need advice coordinated with counsel in the target jurisdiction.

Cross-border M&A should therefore be managed as one transaction across multiple legal systems.

Signing Is Not Closing

This is an important practical distinction.

Signing

The parties execute the transaction documents.

Closing / Completion

The ownership transfer and other completion actions actually occur once the relevant conditions are satisfied.

Between signing and closing, the agreement may regulate:

• operation of the target;
• leakage;
• new contracts;
• borrowing;
• employee changes;
• dividends;
• material transactions;
• regulatory filings; and
• efforts to satisfy conditions.

A deal can therefore be legally signed but not yet completed.

Closing Checklist

Closing should be run through a coordinated checklist.

Depending on the transaction, documents may include:

• executed SPA/APA;
• board resolutions;
• shareholder resolutions;
• share-transfer instruments;
• share certificates;
• payment evidence;
• director resignations/appointments;
• regulatory approvals;
• lender consents;
• releases;
• updated registers;
• disclosures;
• employment documents; and
• closing certificates.

Each item should have an identified responsible party.

Post-Closing Actions

Legal work does not necessarily end when consideration is paid.

Post-closing actions may include:

• SECP filings;
• beneficial ownership updates;
• share register updates;
• issuance of certificates;
• director changes;
• licence notifications;
• contract notices;
• bank mandate changes;
• payment of deferred consideration;
• escrow releases;
• integration obligations; and
• warranty claims.

These should be included in a post-closing checklist rather than remembered informally later.

Post-Acquisition Disputes

M&A disputes frequently arise months after closing.

Potential issues include:

• breach of warranty;
• undisclosed liability;
• incorrect financial information;
• earn-out calculations;
• indemnity claims;
• price adjustment;
• restrictive covenants;
• fraud allegations;
• failure to transfer assets;
• regulatory problems; or
• breach of post-closing obligations.

The transaction documents should establish clear procedures for making and resolving these claims.

M&A and Insolvent Businesses

Acquiring a distressed company requires a different risk analysis.

The buyer may need to consider:

• unpaid creditors;
• secured debt;
• litigation;
• employee liabilities;
• taxes;
• regulatory issues;
• insolvency risk;
• asset ownership; and
• restructuring alternatives.

For distressed deals, internally link to Insolvency, Bankruptcy & Restructuring.

Documents for an Initial M&A Review

For a proposed transaction, useful documents include:

• term sheet or LOI;
• target company profile;
• incorporation documents;
• cap table/shareholding;
• financial statements;
• material contracts;
• financing documents;
• licences;
• litigation list;
• employee information;
• IP records;
• property documents;
• regulatory correspondence;
• valuation information; and
• proposed transaction structure.

If negotiations have already started, also provide all draft transaction documents and disclosure materials.

Legal Framework for M&A in Pakistan

Pakistan does not regulate every acquisition through one single M&A statute.

Different parts of a transaction can engage different legal frameworks.

The Companies Act, 2017 governs core corporate matters and statutory schemes of compromise, arrangement, merger and amalgamation. SECP's current guidance identifies sections 279–285 as the central merger and arrangement provisions.

The Competition Act, 2010 and Competition (Merger Control) Regulations, 2016 regulate qualifying mergers and acquisitions from a competition perspective.

Acquisitions involving listed companies can additionally engage the Listed Companies (Substantial Acquisition of Voting Shares and Takeovers) Regulations, 2017, currently published by SECP in an updated January 2024 version.

Depending on the target, sector-specific laws, foreign-investment rules, tax law, banking regulation, licences and contractual consent requirements may also apply.

A good M&A structure therefore maps the transaction across all applicable regimes before closing.

M&A Is About Buying the Right Business at the Right Risk

A successful acquisition is not simply one that closes.

The buyer needs to receive what it believed it was buying.

The seller needs to receive the agreed consideration without assuming indefinite liability.

Employees, regulators, lenders and important contractual counterparties may also need to be addressed.

Sindh Lawyer approaches M&A matters through:

transaction structure → diligence → risk allocation → approvals → closing → post-closing protection.

That makes the legal work part of the commercial transaction rather than a final paperwork exercise.