Can a Foreign Company Buy an Algerian Startup? The M&A Rules Explained

Every Algerian startup founder who has taken external funding eventually asks the same question: can a foreign company acquire us? And if so, how — and under what conditions? Until recently, the honest answer was “probably not, without major structural complications.” The Investment Law No. 22-18, signed in July 2022, changed that. But the full picture is more nuanced than the headline suggests, and getting it wrong in a deal can be expensive.

The Question Every Founder Asks

For years, the 51/49 rule — which required local Algerian entities to hold at least 51% of any company with foreign investment — made clean foreign acquisitions structurally impossible. A foreign acquirer taking 100% of an Algerian startup would have been outright illegal across virtually all sectors. Founders who built companies with international ambitions either incorporated offshore from the start (often in UAE or France) or accepted that their exit options were limited to local buyers.

That constraint has now been substantially relaxed. Whether it has been relaxed enough for a clean M&A transaction depends on which sector you are in and how sophisticated your deal structure is.

The 51/49 Rule: What Still Applies and What Changed

The 51/49 rule’s gradual dismantling happened in stages. The 2020 Finance Law first narrowed the rule’s application to “strategic sectors” only, transforming it from a blanket restriction to a sectoral exception. The 2022 Finance Law further refined which sectors qualify as “strategic.” Then Investment Law No. 22-18 (July 24, 2022) formalized the liberalization: foreign investors may now establish fully-owned (100%) subsidiaries and, in principle, acquire 100% of Algerian companies in non-strategic sectors.

Non-strategic sectors where full foreign ownership is now permitted include agri-food, construction, telecommunications, and technology — meaning the typical Algerian startup operating in SaaS, fintech, health tech, or e-commerce is no longer automatically blocked from foreign acquisition.

Strategic sectors where the 51/49 rule still applies:

• Military and defense industries
• Railways, ports, and airports
• Upstream hydrocarbons (oil and gas exploration and production)
• National mining domain exploitation
• Pharmaceutical production
• Import of goods for resale in Algeria

Any transfer of shares by foreign parties to other foreign parties in strategic-sector companies requires explicit government authorization — a process with undefined timelines in the current regulatory framework.

The AAPI Process

Foreign investment in Algeria — including acquisitions — is regulated and facilitated by the Agence Algérienne de Promotion de l’Investissement (AAPI), which replaced the former ANDI. AAPI operates as a one-stop shop for investment project registration, incentive applications, and compliance monitoring.

For an acquisition, the foreign acquirer must register the transaction with AAPI. A critical procedural detail that many founders and foreign investors underestimate: the state retains pre-emption rights. Before a foreign party can complete a share transfer in an Algerian company, the government must be notified of any share transfer exceeding 10% of capital. The state then has one month to exercise its right to purchase those shares at the agreed price.

In practice, the government rarely exercises this right for tech startups — the political priority is to attract foreign capital, not to nationalize SaaS companies. But the notification requirement and one-month waiting period must be built into any deal timeline. A foreign acquisition that moves from signed term sheet to close in six weeks is not realistic; three to four months is a more accurate working assumption.

The 2022 Investment Law also introduced a “freezing clause” protecting investors from unfavorable future legislative changes, and it explicitly guarantees the right to repatriate dividends and investment proceeds in foreign currency through official banking channels — both meaningful improvements for foreign acquirers evaluating residual risk.

The Startup Label and Its Impact on Acquisition

Algeria’s startup labeling system, established by Executive Decree No. 20-254 (September 2020), grants labeled startups significant tax advantages: a four-year exemption from professional activity tax (TAP), global income tax (IRG), and corporate tax (IBS), plus VAT exemptions on investment equipment and reduced 5% customs duties on imported equipment.

The label applies to companies no older than eight years with innovative, high-growth business models — and it renews if the company continues to qualify.

For a foreign acquirer, the startup label is both an asset and a complication. The tax advantages are attractive but may not transfer automatically following a change of ownership. More importantly, the label’s criteria are tied to the company’s characteristics, not its ownership structure — a foreign-controlled company can still maintain the label if it continues to meet innovation and growth criteria. Founders should obtain written guidance from the national labeling committee (Comité National de Labellisation) before signing any acquisition agreement.

The FCPR Exit Mechanism

The most significant structural innovation for startup exits arrived in 2025 with the launch of the FCPR (Fonds Commun de Placement à Risque) framework. FCPRs are pooled venture capital vehicles that allow private and institutional investors to co-invest in Algerian startups with a minimum fund size of 50 million DZD and as few as two unitholders. Afiya Investments was the first fund approved under this framework.

FCPRs matter for exits because they create a secondary market: an FCPR investor can sell its position to another FCPR or to a strategic acquirer, creating a liquidity pathway that previously did not exist in the Algerian ecosystem. For a foreign acquirer, an FCPR-backed startup is significantly easier to acquire cleanly — the fund holds defined shares with documented ownership, professional governance, and audited financials.

A Real Case: Algeria’s First Public Fund Exit

In December 2025, travel-tech startup Völz completed what became the Algerian Startup Fund’s (ASF) first-ever exit. Völz — an online travel agency founded in 2022 by Mohamed Abdelhadi Mezi and Hacene Seghier that allows Algerians to book international flights in DZD with cash-on-delivery — raised $5 million in a Series A round led by Tell Group, a regional investment firm, alongside Groupe Industriel Babahoum Algérie (GIBA).

The ASF’s exit achieved a 3.35x return on its original investment. The deal also included a commercial partnership with Turkish Airlines. Crucially, this was a secondary transaction — existing shareholders (including ASF) sold their stakes to new investors. It demonstrated that the exit mechanics work, that institutional buyers are willing to pay market prices, and that the ASF’s investment thesis was commercially sound.

Völz’s exit was a domestic deal, not a foreign acquisition. But the mechanics it demonstrated — clean share transfer, documented returns, institutional-grade documentation — are the same mechanics a foreign acquirer would rely on.

Preparing Your Startup for Acquisition

The gap between a startup that can be acquired and one that cannot is rarely the investment law — it is the state of the company’s internal documentation. Foreign acquirers, particularly those with institutional backing, conduct thorough legal due diligence. Algerian startups are often not prepared.

Clean cap table: Every share, every convertible instrument, every option grant must be documented with signed agreements and board resolutions. Informal equity agreements that “everyone understands” will kill a deal in due diligence.

IP ownership: All code, designs, and proprietary technology must be formally assigned to the company. Contractor work done without IP assignment clauses creates acquirer liability. Founders’ pre-company work that was never formally transferred creates the same problem.

Employment contracts: All key employees — including co-founders — should have current, signed employment contracts or consulting agreements with non-compete and IP assignment clauses. Acquirers need to know they are buying the team, not just the code.

Regulatory compliance: Valid startup label, up-to-date tax filings, CNAS/CASNOS social security compliance for all employees. An acquirer’s lawyers will check all of this.

Audited financials: At minimum for the past two years. A foreign acquirer will not accept management accounts as the basis for a valuation.

The SPAS (Société par Actions Simplifiée) legal structure, introduced by Law 22-09 in May 2022 specifically for labeled startups, is the cleanest structure for acquisition preparation. It allows flexible shareholder agreements, no minimum capital requirement, and more sophisticated equity mechanics than the standard SARL structure.

Sources & Further Reading

• New Investment Law in Algeria: What It Does and Does Not Change for Foreign Investors — Norton Rose Fulbright
• Doing Business in Algeria: A Guide to the New Investment Landscape — LexAfrica
• Algeria’s Public Startup Fund Scores First Exit as Travel-Tech Völz Raises $5M — Launch Base Africa
• Algeria’s VOLZ Raises $5 Million in Landmark Funding Round — Wamda
• Algeria Startup Ecosystem 2025: Reforms Driving Tech Innovation and Growth — Techpression
• Foreign Investment in Algeria — AAPI Official
• Algeria Withdraws the 51/49 Rule for Non-Strategic Business Sectors — Lexology
• Algerian Startup Fund Overview — Startup Algeria