Financial Due Diligence services in UAE and Dubai
In a world where transactions are getting increasing prominence, the need for a thorough due diligence of the target company before deciding to go ahead with a transaction is extremely critical. The UAE, with Dubai and Abu Dhabi in particular has been experiencing a surge in business transactions.
With the markets trying to shrug off the effects off the pandemic, it is now time for consolidation. Transactions are hence becoming more and more prevalent across all sectors in the UAE. Dubai has always been a hotbed of such activities and Abu Dhabi, with initiatives aimed at weaning away the dependency of the economy from oil, is more focused on alternate sectors.
Why is financial due diligence such a critical service today?
Firstly, any acquirer or investor has to be very sure about how wisely he is spending his money. In this age where fraudulent or incorrectly represented financials are quite prevalent, it is important that an investor aims to read behind the numbers and get a deeper understanding of the target company.
A good financial due diligence ensures that the key business drivers of the target company are fully analyzed and risks and opportunities associated with the business are clearly represented to the investor. This enables the investor to decide on whether to proceed with the transaction; and if proceeding with the transaction, arrive at a suitable enterprise value that offsets the risk.
While HLB HAMT is largely sector agnostic when it comes to financial due diligence services, there are certain specific sectors in Dubai and UAE where our team has successfully conducted financial due diligence services involving large transactions.
Some of the important sectors in Dubai that our team has covered include the following:
- Food and beverage
- Health care
- Industrial products and services
- Financial services
- E-commerce etc.
Each sector has got its own unique considerations that should be analyzed while conducting a financial due diligence. For example in F&B, there is an increasing trend towards aggregator business as opposed to dine-in and takeaways. This has impacts on operating margins, staffing, restaurant locations, and even the business model itself. If the financial due diligence does not correctly capture related trends for the target company, the investor may find himself in trouble because he may have overpaid for the investment under the assumption of higher margins based on historical trends.
Similarly, in technology companies there are several considerations which will impact the financial health of the company. This could include recurring revenue from paid subscription services, relevance of the technology, potential shifts in user behavior due to competitive threats etc.
In sectors like healthcare, it would be more fundamental financial areas that need to be considered. This could include sticky receivables or disputes with insurance companies which could result in potential write offs, the level of insurance empanelment, prices charged to insurance companies, payouts to key doctors, hospital bed occupancy etc.
Our team of analysts at HLB HAMT has got in-depth experience across multiple sectors in financial due diligence and have done several transactions across sectors in Dubai, Abu Dhabi and other parts of the UAE.
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