Mergers & Acquisitions

Enterprise Value (EV) is the total value of the business as a whole — the price you would pay to acquire 100% of the business debt-free and cash-free. It represents the value of the underlying business operations. Equity Value is the value of the shareholders' stake in the business — i.e., what you actually pay for the shares in a transaction. The relationship is: Equity Value = Enterprise Value − Net Debt (debt minus cash). If a business has an enterprise value of AED 100 million and net debt of AED 20 million, the equity value — the price paid for the shares — is AED 80 million. Understanding this distinction is fundamental to structuring and pricing any M&A transaction correctly.

The working capital peg is the agreed "normal" level of working capital (current assets minus current liabilities) that the business needs to operate — and that the buyer expects to be in the business at completion. If the business is delivered with more working capital than the peg (a surplus), the seller receives additional consideration. If delivered with less (a shortfall), the buyer receives a price reduction. Getting the peg right — based on a thorough analysis of historical working capital seasonality and trends — is one of the most commercially significant aspects of deal structuring. A peg set too high hands the seller a windfall; too low hands it to the buyer. Disputes about working capital are among the most common post-closing conflicts in M&A, and they are almost always resolved in favour of the party with better financial analysis.

A Purchase Price Allocation (PPA) is required under IFRS 3 — Business Combinations — whenever one company acquires another. The total price paid for the acquisition must be allocated across all of the identifiable assets and liabilities of the acquired company at their fair values on the acquisition date, with any residual amount recorded as goodwill. This is not optional. If you have acquired a business and are preparing IFRS financial statements, you are required to have performed a PPA. Many UAE businesses complete acquisitions and then record everything as goodwill — which is incorrect under IFRS 3 and will be challenged by external auditors. Identified intangible assets (such as customer relationships, brand, and technology) must be separately recognised and amortised, which affects future reported profits. We perform PPAs that are technically rigorous, auditor-ready, and completed within the 12-month IFRS 3 measurement period.

The answer is almost always: earlier than you think. A UAE IPO on the DFM or ADX requires a minimum of 3 years of audited IFRS financial statements, a Working Capital Report confirming sufficient liquidity for 12–18 months post-listing, and a financial reporting infrastructure capable of meeting the ongoing obligations of a listed company. Building this from scratch typically takes 18–36 months. Businesses that begin the process 6 months before their intended listing date consistently encounter delays, discover historical accounting issues that need to be restated, and face the pressure of compressing a multi-year preparation into an unrealistic timeline. An IPO readiness assessment — understanding precisely what gaps exist between your current financial infrastructure and listing requirements — is the most valuable first step, and the earlier it is taken, the more options management has to address the findings.

Financial restructuring is a voluntary process — the company and its creditors agree to modify the terms of existing obligations (extending maturities, reducing interest rates, converting debt to equity, or partial write-offs) to give the business a sustainable capital structure and a genuine opportunity to recover. It is conducted out of court and is the preferred outcome for all parties, because it typically preserves more value than formal insolvency. Insolvency is a formal legal process — initiated when a company is unable to pay its debts as they fall due or when its liabilities exceed its assets — governed in the UAE by Federal Law No. 9 of 2016 on Insolvency (as amended). Insolvency involves court proceedings, the appointment of official administrators or trustees, and a structured realisation of assets for the benefit of creditors. Financial restructuring, when pursued early and with credible financial analysis, avoids insolvency in the majority of cases. The earlier restructuring conversations begin — ideally before covenant breaches or missed payments — the wider the range of available options and the better the outcomes for all parties.

Valuation multiples in the UAE vary significantly by sector, business quality, growth profile, and market conditions — and there is no single "right" multiple. As a general framework: high-quality recurring-revenue businesses (technology, healthcare, professional services) typically trade at EV/EBITDA multiples of 8x–15x or more. Industrial and trading businesses with stable but less differentiated cash flows typically range from 4x–8x EBITDA. Real estate and asset-heavy businesses are often valued on a net asset value (NAV) basis rather than earnings multiples. Early-stage or high-growth businesses without stable EBITDA are typically valued on revenue multiples or discounted future cash flow. UAE-specific factors — free zone structures, reliance on key-person relationships, concentration of revenue with a small number of customers, and the absence of a long track record of IFRS-compliant financial statements — can all compress multiples relative to comparable businesses in more developed markets. Our valuations are grounded in observable market data and adjusted for business-specific factors with transparent, documented reasoning.