01The short answer
Most profitable UAE businesses are valued on the earnings they can sustain, using either a multiple of maintainable earnings or a discounted cash flow, and cross-checked against market evidence. Holding and asset-rich companies are valued closer to their net assets. The purpose of the valuation, the date and the interest being valued decide which approach carries most weight.
02Three families of approach
The income approach values a business by reference to the cash or profit it is expected to generate. The market approach compares it with prices paid for similar companies or shares. The asset approach builds value from the business's net assets.
Published deal data for private UAE companies is scarce, so market evidence is usually drawn from regional and international listed companies and transactions and adjusted for size, liquidity and risk. This makes the income approach the anchor for most valuations.
03Adjustments UAE accounts usually need
Accounts prepared for licensing, banking and tax rarely show the profit a buyer would rely on. Typical adjustments include:
- A market salary for owners who draw no salary or take profits as drawings
- Related-party rents, management fees and trading with connected companies on non-market terms
- Visa, accommodation and other costs that relate to the owners personally
- One-off items such as licence restructuring costs or a single large contract
- The accrued end-of-service gratuity liability, treated as a debt-like item
04A worked illustration
A Dubai trading company reports profit of AED 2.4 million. The owner takes no salary, but a buyer would need a general manager at AED 600,000 a year; personal costs of AED 150,000 run through the business. Maintainable profit is therefore about AED 1.95 million before tax. At an illustrative multiple of five, enterprise value would be about AED 9.75 million, from which borrowings and the gratuity liability are deducted and surplus cash added to reach equity value. The figures are illustrative; real multiples depend on risk, growth and evidence.
05When to use a professional valuer
If the figure will be relied on by people with different interests, such as a partner, an investor, an auditor or the Federal Tax Authority, an independent valuation carries more weight and records the reasoning.
This article explains general principles for UAE readers. Your own valuation will depend on your company, its documents and why the figure is needed, so speak to us before relying on it.