Over the past 12 months, the M&A market in Tunisia experienced a relative slowdown, influenced by a climate of political transition and economic challenges that impacted investor confidence. During this period, both local and international investors adopted a more cautious approach, leading to a decrease in deal activity. However, recent months have shown a clear shift. M&A activity is gaining momentum again, with a particular focus on industrial sectors, technology and renewable energy.

Over the past 12 months, the Tunisian market showed a mixed but optimistic outlook. The industrial sector maintained its dominant position, with a particular focus on mechanical and electrical industries. The agricultural sector ranked second in terms of investment, followed by the services sector. The renewable energy sector, in particular, experienced remarkable growth, with investments increasing by 150%, reflecting a strong and growing interest in sustainable energy solutions.

Overall, despite some challenges, these trends indicate a shift towards growth and diversification, particularly in renewable energy and industrial investments.

Over the past year, the mechanical and electrical industries, as well as IT services companies, have been a major focus of M&A activity. A significant portion of the investments is concentrated in the automotive components sector, where companies are looking to expand their market share and modernise production facilities. The sector’s strategic importance has driven consolidation, with several key acquisitions and mergers aimed at improving operational efficiency and competitiveness.

The pharmaceutical industry has also seen significant M&A activity, reflecting ongoing sectoral transformations.

In Tunisia, there are several primary techniques and legal means for acquiring a company. These methods are guided by the commercial law and regulatory framework.

The main techniques include:

• Share purchase: A share purchase is one of the most common methods of acquiring a company. In this structure, the acquirer buys the shares of the target company, thereby gaining control of the company and its assets. This method does not require the transfer of assets, but it requires a detailed due diligence process and compliance with corporate formalities, including shareholder approval and, in some cases, the approval of regulatory authorities.
• Asset purchase: In an asset purchase, the buyer acquires specific assets of the company, such as tangible assets (eg, equipment, real estate) and intangible assets (eg, intellectual property, goodwill). This method allows the buyer to avoid liabilities associated with the target company, but it requires a detailed due diligence process and the transfer of ownership for each asset.

Each of these techniques requires thorough legal documentation, including due diligence, agreements, regulatory filings and shareholder approvals, depending on the nature of the acquisition. Additionally, certain thresholds may require approval from the Tunisian Competition Council to ensure that the transaction does not lead to anti-competitive practices.

The primary regulators for M&A activity in Tunisia are the Ministry of Commerce, the Financial Market Council (Conseil du Marché Financier, CMF), the Competition Council and the Central Bank of Tunisia, depending on the sector and nature of the transaction. Additionally, sector-specific regulatory bodies may also be involved to ensure compliance with industry regulations.

Foreign investors are generally free to invest in most sectors in Tunisia and may hold up to 100% of the capital of their subsidiary without prior authorisation or the obligation to partner with a Tunisian entity.

However, certain sectors remain regulated. For instance, the commercial sector is not fully liberalised, as engaging in commercial activities requires foreign investors to obtain a trader’s card from the Ministry of Commerce or to limit their foreign ownership to a maximum of 50% of the share capital.

In Tunisia, any project or economic concentration operation that is likely to create or strengthen a dominant position in the domestic market or a substantial part of it must be approved by the Minister in charge of commerce. The transaction must be submitted for approval if one of the following conditions is met: (i) the combined turnover of the parties concerned in Tunisia exceeds TND100 million; (ii) over the past three fiscal years, the companies involved have collectively held an average market share exceeding 30% of sales, purchases or any other transactions in the domestic market for substitutable goods, products or services, or in a substantial part of that market.

The Competition Council evaluates whether the transaction would create or strengthen a dominant position that significantly restricts competition. If risks to market competition are identified, the Council may impose conditions, request modifications or prohibit the transaction.

In M&A transactions, acquirers must conduct thorough due diligence on employment contracts, collective agreements and the target’s compliance to evaluate potential financial risk, mitigate potential liabilities and ensure a smooth transition.

Acquirers involved in M&A in Tunisia should pay particular attention to the following key labour law regulations:

• Transfer of employees and employment contracts: When a business undergoes a merger, acquisition, or sale of assets, the employment contracts are automatically transferred to the new employer under the same terms and conditions. The new employer assumes all rights and obligations relating to the employees, ensuring continuity of employment.
• Collective agreements and employee rights: Tunisia has sector-specific collective agreements that impose special obligations on employers. The acquirer must verify the target company’s compliance with the minimum wages and benefits, the job security provisions, and the severance and redundancy conditions.

Ensuring compliance with these agreements is essential to prevent financial and legal risks.

Acquirers should conduct thorough social security due diligence, ensure compliance with applicable regulations and obtain clearance certificates from the National Social Security Fund CNSS to avoid any future liabilities.

Easing of Regulatory Approvals as an Investment Catalyst

Tunisia’s regulatory landscape is evolving rapidly, with a focus on reducing administrative burdens and eliminating economic and administrative authorisations. Numerous licences have been abolished since the launch of this initiative in 2018, followed by a second wave in 2022, which led to the removal of 25 authorisations across various economic sectors, including tourism and transport. A third wave of reforms is currently under way. These regulatory changes aim to enhance the business climate and attract more foreign investments while addressing the needs and expectations of local economic players.

Tax and Customs Amnesty (Finance Law 2025)

The tax and customs amnesty allows companies to avoid certain tax and customs penalties, which could make some businesses more attractive to potential acquirers, particularly those with complex tax histories. Such amnesty measures could also facilitate the integration of these businesses into larger corporate groups.

In Tunisia, there have been no significant changes in the legislation relating to takeover law in the last 12 months. However, discussions on modernising M&A legislation are ongoing, and some aspects could be reviewed.

In Tunisia, it is not uncommon for a bidder to acquire a stake in the target company before launching a public offer, but such transactions are subject to regulatory constraints.

Stakebuilding strategies typically include:

• Open market purchases: Acquiring shares on the stock exchange before the offer, while complying with disclosure obligations once certain thresholds are crossed.
• Private negotiations: Purchasing shares from existing shareholders through block trades or negotiated deals.

However, Tunisian financial market regulations impose mandatory disclosure requirements and public offer obligations if a bidder crosses the threshold granting majority control.

In Tunisia, shareholding disclosure requirements are strictly regulated to ensure market transparency and investor protection. Any natural or legal person, acting alone or in concert, who comes to hold, directly or indirectly, more than one-twentieth, one-tenth, one-fifth, one-third, one-half or two-thirds of the capital of a public offering company is required to declare the crossing of any of these thresholds to the company, the CMF and the Tunis Stock Exchange within five business days from the date of crossing. The declaration must specify the total number of shares and voting rights held, in accordance with the conditions set by CMF regulations. The same declaration must also be made within the same timeframe and to the same authorities when the shareholding or voting rights fall below the aforementioned thresholds. Failure to comply with these disclosure obligations results in the suspension of voting rights attached to the undisclosed securities for any shareholders’ meeting held within three years following the date of voluntary regularisation by the concerned party or enforcement by the CMF after detecting the threshold crossing. The CMF makes the decision to suspend voting rights after hearing the party concerned. It may also impose a fine payable to the Public Treasury on those responsible for the violation.

A company may not introduce different reporting thresholds (higher or lower) in its articles of association for the reporting obligations of threshold crossings. Law No. 94-117 of 14 November 1994 imposes specific and binding legal obligations on any person (natural or legal) reaching or exceeding certain thresholds. These legal thresholds must be met uniformly by all parties involved.

The market for financial/derivative products is not well-developed in Tunisia. However, it is possible to trade certain instruments such as convertible bonds, which offer investors the option to convert their bonds into underlying shares at a predetermined price.

In addition, public offers for the purchase or exchange of debt securities that do not give access to capital, admitted to listing or traded on the over-the-counter market, are carried out by centralisation with the Stock Exchange, according to the simplified public offer procedure.

These public offers may be offers to purchase or exchange with or without balance.

Transactions relating to derivative products must be reported to the relevant authorities, such as the CMF, in compliance with applicable transparency and disclosure obligations in Tunisia.

In the context of acquisition of a company whose securities are admitted to listing or traded on the over-the-counter market, shareholders must disclose their intentions and details regarding their ownership. Indeed, individuals or entities acting alone or in concert that plan to acquire a block of shares that may confer majority voting control in a publicly traded company must, before completing the transaction, submit their request to the CMF, specifying in particular:

• the identity of the sellers of the control block;
• the identity of the buyers;
• the number of shares or voting rights they hold in the targeted company and the percentage of their participation;
• the number of shares they propose to acquire and the percentage they represent in the capital;
• the intentions of the buyers;
• the detailed structure of the remaining capital;
• the agreed price; and
• the transfer protocol for the block of shares.

If the CMF authorises the acquisition of the control block, it can require the applicants to proceed with a public offering for the remaining capital or to submit to a maintenance procedure registered on the stock exchange, as appropriate and considering the interests of the remaining shareholders.

The disclosure of a transaction is required when it becomes sufficiently certain to influence the market. Indeed, target companies are required to provide the CMF and the Tunis Stock Exchange with all necessary information and documents for the negotiation or assessment of their securities, in accordance with the conditions set forth by the General Regulation of the Stock Exchange. At the request of the CMF, these companies must disseminate this information or any additional explanation required by the CMF through press releases.

Due to the absence of a clear legal provision on the exact timing of disclosure, companies adopt different approaches in practice. Some choose to disclose earlier (eg, after a non-binding letter of intent) to reassure investors, while others delay disclosure. Factors such as investor pressure, competition, compliance and confidentiality influence this decision.

In the context of a negotiated business combination, the first step for all parties involved is to conduct due diligence – an audit that allows the bidding company to assess the strengths and weaknesses of the target. The objective is to mitigate acquisition risks, determine the fair value of the shares and gather precise information necessary to structure the offer. This process involves investment bankers, tax advisers and lawyers, each conducting an audit within their respective areas of expertise. Specifically, lawyers are responsible for the legal due diligence, ensuring that the target company aligns with its strategic objectives and complies with regulatory obligations. Tax advisers assess fiscal risks by verifying compliance with tax legislation. Investment bankers analyse the financial health and profitability of the target by scrutinising its financial statements.

In Tunisia, standstill and exclusivity clauses can be used in M&A transactions, but their application depends on the contractual framework and negotiations between the parties.

• Standstill clauses: These are not specifically regulated by Tunisian law but can be integrated into prior agreements (letters of intent, memoranda of understanding) between the potential buyer and the target. They are used to prevent a potential acquirer from increasing its stake in the target company without prior consent, in particular to avoid a hostile takeover.
• Exclusivity clauses: These are more common in Tunisia and are often included in negotiation agreements or memoranda of understanding between the parties. They allow a potential buyer to benefit from a period during which the person concerned undertakes not to discuss with other buyers.

In transactions involving publicly traded companies, these commitments must comply with the requirements of the CMF, in particular in terms of transparency and fairness between shareholders.

In Tunisia, the terms and conditions of a tender offer must comply with the regulatory framework and are generally documented in an offer prospectus submitted to the CMF rather than in a separate definitive agreement between the parties.

In Tunisia, the process of acquiring or selling a business can vary depending on the form of the company, the complexity of the transaction, the size of the target company, the sectors involved and the necessary authorisations.

The process of acquiring or selling a company can take between four and 12 months, depending on the circumstances and the conditions precedent necessary for the completion of the operation, if applicable.

Two distinct rules apply in different contexts: one establishes the minimum percentage required in a partial tender offer, while the other mandates a mandatory tender offer when a controlling threshold is reached.

Indeed, when a public offer does not cover all the equity securities and securities granting access to the capital of the issuing company, it must target at least 10% of such securities.

On the other side, when a natural or legal person, acting alone or in concert, comes to hold the majority of voting rights in a company, they must immediately notify the CMF and submit a public offer for the remaining capital. These rules ensure market transparency and the protection of minority shareholders.

In Tunisia, cash is more commonly used as consideration in M&A transactions, especially in public offers or when acquiring controlling stakes in a company, though share-based consideration is also possible.

Takeovers in Tunisia are subject to standard conditions aimed at securing transactions, but regulators impose restrictions to protect investors and preserve market balance, such as the approval of the CMF, the absence of a competing bid, and the obligation to launch a public offer for the rest of the shares if the legal threshold is exceeded. Buyers must therefore anticipate regulatory requirements and structure their offers accordingly.

To ensure that a takeover offer is only settled if it results in the bidder acquiring control over the target company, such offer may be subject to a minimum acceptance threshold as a closing condition. Accordingly, when the offer covers all shares, the bidder may reserve the right to withdraw from the transaction if the specified threshold is not met. Typically, the minimum acceptance threshold is 50%+1 to secure control over the target company. However, certain takeover offers set a threshold exceeding two-thirds of the share capital, suggesting that the objective extends beyond mere control to a fundamental restructuring of the target. Such restructurings require the approval of a qualified majority of shareholders at the target company’s general meeting.

Noted that the CMF may request a review of the offer if it deems the proposed threshold or the bidder’s withdrawal right to be unacceptable.

Under Tunisian law, a public offer cannot be conditional on obtaining financing. Any takeover bid must be financially guaranteed before it is launched. The bidder must provide proof of financing, usually in the form of an irrevocable bank guarantee, ensuring that it will be able to pay for the securities if the offer is accepted.

Under Tunisian law, the deal security measures available to a bidder are somewhat limited. However, a bidder does have the right to match a competing offer if another party presents a higher bid, provided that they adjust their own offer to remain competitive. This may entail withdrawing their initial offer, modifying the terms and conditions of their offer, or submitting a higher bid in relation to their public tender offer or exchange offer.

In cases where a bidder does not seek 100% ownership of a target company, it can still negotiate additional governance rights to influence the company’s management and operations. These may include:

• Shareholders’ agreements: Establishing agreements that grant specific voting rights or approval rights on key decisions.
• Board representation: Securing the right to appoint members to the board of directors to ensure influence over strategic decisions.
• Information rights: Obtaining rights to access financial reports and other critical information regarding the target company.
• Veto rights: Negotiating veto rights on significant actions, such as asset sales or changes in capital structure.
• Pre-emptive rights: Seeking rights to purchase additional shares before they are offered to other investors to maintain their ownership percentage.

These measures allow the bidder to maintain a degree of influence over the target without requiring full ownership.

In Tunisia, shareholders have the right to vote by proxy at general meetings. This provision allows shareholders who cannot attend the meetings to delegate their voting power to another person. It is important to note that certain restrictions may apply in specific situations, such as limitations on the number of mandates that one person can represent.

Under Tunisian law, a squeeze-out mechanism is possible when a natural person, legal entity or a group holding at least 95% of the voting rights of a listed company or a company traded over the counter wishes to acquire the remaining shares. In this case, they can submit a public withdrawal offer to the CMF for all capital shares not held by them. The CMF conducts the necessary verifications, and if the request is deemed admissible, it publishes a notice of the offer opening. It is important to note that this notice must indicate that, regardless of the outcome of the offer, the delisting of the company or its reclassification as a non-public offering entity will be ordered. Outside of this scenario, entities controlling a listed company must also consult the CMF when proposing significant modifications to the by-laws, the sale of major assets, or the removal of compensation for shares over multiple financial years. The CMF assesses the impacts of these operations on the rights of shareholders and determines the conditions for implementing the public withdrawal offer. Thus, squeeze-outs in Tunisia are strictly regulated, ensuring the protection of minority shareholders’ interests.

In Tunisia, it is common to seek irrevocable commitments from principal shareholders of the target company to tender their shares or vote in favour of a transaction. Negotiations for these commitments typically occur during the early stages of the deal process, often before a formal offer is made.

In Tunisia, a bid becomes public once the CMF receives the bid project. The CMF then publishes a deposit notice and informs the stock exchange, which suspends trading of the relevant securities. The CMF has a set period to assess the admissibility of the offer and may request additional information from the intermediaries involved. Trading resumes two days after the opening or rejection notice is published. The opening notice must include essential details such as the identity of the bidder, the offered price and the overall timeline of the operation. This process ensures transparency and compliance with regulatory requirements.

In a business combination, the required disclosures for the issuance of shares typically include: details of the transaction; shareholder approval; explanation of the valuation of the shares being issued, including any independent appraisals if applicable; information on how the issuance will affect the ownership structure and rights of existing shareholders; updated financial statements reflecting the new share structure and any potential impact on earnings per share, etc.

Bidders are generally required to file financial statements in their disclosure documents to give a clear picture of their financial position.

In Tunisia, financial statements must be prepared in accordance with national accounting standards and, in some cases, according to international standards (IFRS).

In Tunisia, it is not necessary to fully disclose transaction documents in the context of a public offering. However, summaries of important terms must be provided to ensure transparency towards investors, while complying with applicable regulations and protecting sensitive information.

Directors have essential duties based on transparency, loyalty and the protection of the interests of the company and its shareholders. However, depending on the nature of the transaction, they must also consider the interests of other stakeholders, including employees, creditors and the financial market as a whole.

In practice, the establishment of special or ad hoc committees in the context of M&A transactions is not systematic, but it can be adopted in certain transactions, in particular when governance issues or conflicts of interest are identified.

In Tunisia, the courts recognise the jurisdiction of boards of directors in M&A, but deference is not as formal as the business judgement rule in the United States and depends on the fulfilment of fiduciary duties and transparency in the decision-making process.

In Tunisia, directors involved in a combination of companies often seek legal, financial, valuation and governance advice. These independent advisers are crucial to ensure transparency, compliance and informed decision-making during the transaction.

Tunisian law requires directors and shareholders to declare any potential conflicts of interest. The Commercial Companies Code imposes strict disclosure and approval requirements for transactions involving conflicts of interest. Failure to comply with disclosure and governance rules may result in administrative sanctions, fines, or even civil and criminal liability.

Although hostile takeovers are permitted in Tunisia, they remain underdeveloped. Such transactions are often complex and may face significant resistance. Target companies can implement defensive measures to counter a hostile takeover.

Tunisian law allows directors to implement defensive measures to protect the company against hostile takeovers. However, such measures must be justified by legitimate reasons in the company’s best interest and must comply with Tunisian legal requirements, particularly regarding transparency and disclosure.

Common defensive measures in Tunisia include:

• Capital increase: Companies may decide to increase their capital to dilute the potential acquirer’s percentage of ownership, thereby making the offer less attractive.
• Statutory amendments: Directors may modify the company’s statutes to impose stricter conditions for takeovers, such as requiring qualified majorities for the approval of offers, complicating the acceptance of a hostile bid.
• Strategic alliances – formation of partnerships: Alliances may be established with other companies or investors to strengthen the company’s market position, which can deter hostile offers by demonstrating increased stability.
• Possibility of a counteroffer or a higher bid.

Directors have crucial duties when implementing defensive measures. They must act fairly, diligently and transparently, while avoiding conflicts of interest and complying with legal requirements. Compliance with these duties is essential to protect the interests of the company and its shareholders.

Directors cannot simply say no to an offer without a legitimate reason. They must act in the interest of the company and the shareholders and, in the event of rejection, justify their decision on objective and legal grounds.

In Tunisia, litigation relating to M&A transactions remains relatively limited compared to other jurisdictions. However, disputes can arise, particularly concerning a breach of contractual obligations, including non-compliance with warranty clauses or exclusivity agreements, or disagreements among shareholders, where post-acquisition disputes may occur regarding governance issues or the execution of shareholder agreements.

Arbitration is often favoured as a means to ensure a swift and confidential resolution to these disputes, providing parties with a more flexible and efficient framework for addressing conflicts.

Litigation in M&A transactions in Tunisia primarily arises in the following stages:

• Before the conclusion: abusive termination of negotiations, violation of exclusivity or confidentiality clauses; or
• After finalisation: breaches of asset and liability warranties, post-acquisition disputes (governance, non-competition).

Litigation that occurred in 2020, particularly due to the pandemic, highlighted several key lessons for ongoing transactions:

• Importance of Material Adverse Change clauses.
• Flexibility of conditions precedent: Regulatory delays and financing difficulties underscored the need to include adjustment mechanisms for exceptional crises.
• Force majeure: The pandemic strengthened the requirement for detailed force majeure clauses.
• Preference for mediation and renegotiation: In the face of uncertainty, many parties favoured renegotiation over litigation, emphasising more flexible and collaborative approaches. These lessons have led to improved crisis anticipation in M&A contracts.

Shareholder activism is an emerging force in Tunisia within larger publicly listed companies. While still relatively limited compared to other jurisdictions, it is gaining traction as shareholders increasingly seek to influence corporate governance and strategic decisions.

In Tunisia, shareholder activism directly influencing M&A decisions, spin-offs or major divestitures remains marginal. However, in some cases, minority or institutional shareholders may:

• Lobby for the sale of assets deemed non-strategic in order to optimise the profitability of the company.
• Oppose M&A transactions if they are perceived as unfavourable to minority shareholders or destructive of value.
• Encourage restructuring to improve governance and transparency.

In Tunisia, shareholder activism aimed at interfering with the completion of announced transactions is relatively rare. This is primarily due to the market structure and the limited influence of minority shareholders. As a result, while there may be discussions or concerns raised by shareholders, significant interference with announced transactions is uncommon.