Business Valuation in Dubai: Art, Science, and Regulatory Requirements

How much is your UAE business worth? The answer depends on who is asking—and why. A valuation for a bank loan looks different from a valuation for a tech startup exit.

Business valuation is a complex blend of financial modeling (Science) and market understanding (Art).

When Do You Need a Valuation?

1. Mergers & Acquisitions (M&A): Selling the company or buying a competitor. Due diligence often accompanies valuation.
2. Shareholder Exit: One partner wants to leave. How much should the remaining partners pay for their shares?
3. Litigation / Dispute: Divorce or partnership breakup requiring court settlement.
4. Financial Reporting: Purchase Price Allocation (PPA) or Goodwill Impairment testing under IFRS standards.
5. Fundraising: Justifying share price to VCs or Equity Investors.
6. Tax Planning: Transfer pricing for intercompany transactions.
7. Estate Planning: Determining value for inheritance or succession.

The 3 Main Approaches

1. Income Approach (Discounted Cash Flow - DCF)

The most common method for going concerns.

• Logic: The value of a business is the present value of its future cash flows.
• Process: We project revenue and profits for 5 years, determine a "Terminal Value," and discount it back to today using a Weighted Average Cost of Capital (WACC).
• UAE Context: Determining the "Beta" (risk) for a Dubai SME is tricky. We use specific emerging market premiums to ensure the rate is realistic.

DCF Calculation Example

Scroll to see all columns →

Note: Terminal Value typically represents 50-70% of total value for mature businesses.

2. Market Approach (Multiples)

The benchmark method.

• Logic: "A company like ours sold for 10x EBITDA last month."
• Process: Comparing P/E (Price to Earnings) or EV/EBITDA ratios of publicly listed competitors or recent private transaction data.
• Challenge: Finding public data for private UAE companies is hard. Valuers rely on subscription databases (Bloomberg, Capital IQ) and private deal knowledge.

Common Multiples in UAE (2025)

Scroll to see all columns →

Multiples vary significantly based on growth rate, profitability, and customer concentration.

3. Asset-Based Approach (Cost)

Used for holding companies or distressed sales.

• Logic: The business is worth the sum of its parts.
• Process: FMV of Assets - FMV of Liabilities = Value.
• Usage: Real Estate Holding companies or liquidation scenarios.
• Adjustments: Book values often differ from market values. Real estate, inventory, and receivables may need independent appraisal.

The UAE "Discount" Factors

Valuing an SME in Dubai differs from valuing a stock on the NYSE.

• Lack of Marketability Discount (DLOM): You can't sell a private LLC share in 2 seconds like an Apple stock. We apply a discount (often 20-30%) to reflect this illiquidity.
• Key Person Risk: If the founder leaves, does the revenue stop? If yes, the valuation drops significantly.
• Customer Concentration: If 50% of revenue comes from one customer, that's a major risk factor.
• Visa/Residency Link: For many SMEs, the owner's residency depends on the company. This creates reluctance to sell 100%, affecting deal structures.

Case Study: Restaurant Chain Valuation for Sale

Situation: A 5-outlet F&B chain in Dubai sought a buyer. Owner claimed value of AED 15 million based on "replacement cost."

Our Analysis:

• Historical EBITDA: AED 1.8 million
• Industry multiple: 5x EBITDA = AED 9 million base
• Adjustments:
  • Owner salary not in P&L: -AED 300,000 (reduces EBITDA to 1.5M)
  • One lease expiring in 6 months with uncertain renewal: -15% discount
  • Strong brand recognition: +5% premium
• Final Valuation: AED 7.2 - 8.0 million

Outcome: Sold for AED 7.5 million. Owner initially disappointed, but the defensible valuation prevented buyer renegotiation attempts.

The Valuation Report

A professional valuation report is a 40-50 page document detailing:

• Industry Analysis (Macro & Micro)
• Company Historical Performance
• Financial Projections (and the assumptions behind them)
• Calculation of Discount Rates
• Sensitivity Analysis (What if revenue grows 5% instead of 10%?)
• Conclusion of Value (usually expressed as a range)

When is a Formal Valuation Required?

Scroll to see all columns →

Frequently Asked Questions

How much does a business valuation cost?

For a straightforward SME valuation: AED 15,000-35,000. Complex valuations (multiple subsidiaries, IP, real estate): AED 50,000-100,000. Court-appointed expert valuations may be higher.

How long does the process take?

Typically 3-4 weeks from engagement to final report. Complex cases may take 6-8 weeks. Rush engagements are possible at premium pricing.

Can I value my own business?

You can estimate, but self-valuations are not credible for transactions, disputes, or compliance reporting. Banks and courts require independent certified valuers.

What qualifications should a valuer have?

Look for CFA (Chartered Financial Analyst), CVA (Certified Valuation Analyst), or FRICS (Fellow of RICS) credentials. In UAE courts, experience matters more than credentials—ask for references.

Will the valuation hold up in court?

A properly prepared valuation report by a qualified expert should withstand cross-examination. The key is documenting all assumptions and using recognized methodologies.

Conclusion

Guesswork in valuation leads to lost value or failed deals. A certified valuation provides an objective, defensible number that stands up to scrutiny in boardrooms and courtrooms.

Related Resources

• Due Diligence Services - Comprehensive M&A transaction support
• IFRS Implementation Guide - Understanding fair value accounting standards
• External Audit Services - Audited financials required for valuations
• Tax Consultation - Transfer pricing and tax implications
• Understanding Audit Opinions - Quality of financial statements matters for valuations

Certified Valuers Farahat & Co's valuation team includes CFA and CPA charterholders with deep experience in UAE deal-making. Contact us for a confidential discussion of your valuation needs.