Business Valuations: Insights for the MENA Region

Business Valuations

Today, understanding the value of your business is more critical than ever. Whether you are seeking to attract investment, plan for growth, or prepare for a merger or acquisition (M&A), a professional business valuation offers key insights into your company’s potential to create long term value. Understanding the regional dynamics and comparable companies can help frame the narrative of value creation and strategic growth.  

Why Does a Business Valuation Matter? 

It offers more than just a number—it provides strategic insights into key value drivers and potential risks. Whether you’re a startup looking for funding or a group planning an acquisition or an exit of a subsidiary or a carve route, a comprehensive valuation enables you to: 

1. Attract Investors: Investors seek transparency. A robust business valuation helps demonstrate the long-term potential of your company by outlining both risks and opportunities for value creation. 

2. Facilitate Mergers & Acquisitions (M&A): Buyers need to understand the value they are acquiring, while sellers want to ensure they are maximizing returns. Accurate valuations support negotiations and informed decision-making. 

3. Growth Strategy: Understanding company’s value drivers enables better strategic and cost optimization plans, scaling operations efficiently, and addressing key risks. 

4. Compliance and Financial Reporting: Compliance with IFRS and IVSC standards requires accurate valuations as per methodology defined and market practices, especially for multi-jurisdictional businesses or family firms preparing for succession. 

How Are Business Valuations Conducted? 

Valuations are conducted using various methods, depending on the business’s industry, purpose, and stage of development. Here are four widely used approaches:

1. Comparable Company Analysis (CCA)

CCA uses the valuation multiples of publicly traded companies to estimate your company’s value. This method benchmarks your business against comparable firms, using metrics like Price-to-Earnings (P/E), (EV/SALES) or Enterprise-Value-to-EBITDA (EV/EBITDA). If your company is expected to grow faster than its peers, a premium multiple may be applied. 

Example case: 

Criteria 

Details 

Company Name 

ABC Limited 

Valuation Metric  

EV/EBITDA Multiple 

Comparable Multiple 

8x 

Company EBITDA 

$10 M 

Estimated Valuation 

$80 M (8 × $10 M) 

This method is particularly useful in sectors like real estate, banking and or hospitality in the UAE, where several public comparables such as Emaar Properties, DAMAC Properties, and ENBD exist. CCA is quick but should be used cautiously in niche industries with few comparable companies.

2. Discounted Cash Flow (DCF)

The DCF method is widely used for mature companies, and regarded as the most thorough valuation technique, focusing on a company’s future cash flows potential. It requires estimating future revenues and costs, reinvestment, working capital, taxes, and arriving at free cash flows for explicit period, discounting them to their present value using a discount rate that reflects the company’s long-term growth and risk profile.  

The final business valuation depends heavily on the assumptions regarding margins, growth rates, discount rates and risk. 

Example case: 

Criteria 

Details 

Company Type 

Logistics Company in the UAE 

Free Cash Flow (Year 1) 

$5 M 

Annual Growth Rate (Years 1-5) 

10% 

Long Term Growth Rate (Perpetuity for UAE) 

4% 

Weighted Average Cost of Capital (WACC) 

12% 

Time Horizon 

5 Years 

DCF Value (Enterprise Value)  

Discounting projected free cash flows at 12% WACC over 5 years and for perpetuity.  

Formula 

FCF1/(1+r)1 + FCF2/(1+r)2 + FCFn / (1+r)n + PV of Terminal (Perpetuity) Value 

 

This method is particularly effective for industries with stable cash flows, such as construction, oil and gas, and logistics—all key sectors in the MENA region.

3. Precedent Transactions (PT)

Precedent Transactions are often used when a company is seeking acquisition or planning to sell. This method involves analyzing the valuations of similar companies in past transactions, especially those with successful IPOs, to estimate a range of values. 

Example case: 

Criteria 

Details 

Company Type 

Mobility Startup in the UAE 

Comparable Deals 

Careem’s acquisition by Uber 

Careem’s Valuation 

$3.1 B 

Careem’s Revenue Multiple 

5x 

Company Revenue 

$20 M 

Estimated Valuation 

$100 M (5 × $20 M) 

 

PT analysis can offer useful insights when there are enough comparable deals in the region, particularly in technology, healthcare, and energy sectors. 

4) Venture Capital (VC) Method 

It’s often used in early-stage IPO companies where assumptions are made about free cashflows at the time of exit, and its multiples (based on an anticipated IPO value), expected IRR, time to exit, comparable companies and trading multiples including sensitivity. 

Regional Considerations for Business Valuations in MENA 

While these business valuation methods are universally applicable, businesses in the UAE should account for several regional factors: 

1. Regulatory Environment:  

Regulations vary by sector. Industries such as banking and insurance are heavily regulated, impacting business valuations due to compliance costs. 

2. Economic Diversification: 

Governments are actively promoting business segments beyond oil, such as tourism, technology, renewable energy, and innovative startups. Companies operating in these industries may see a premium in their valuations due to government support and favourable growth conditions. 

3. Family Businesses and Succession Planning: 

Family-run businesses are common and accurate business valuations are essential for succession planning, IPOs, or attracting private equity investment. 

4. Free Zones vs. Mainland: 

Companies operating in free zones like Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM) may have higher valuations due to tax benefits and access to global markets. 

Why Work with Kuvera Consulting? 

Business Valuations

Business valuation goes beyond just arriving at a figure—it’s an essential tool that informs critical business decisions, builds investor confidence, and fosters sustainable growth. 

Whether you’re a startup seeking venture capital or an established company considering an exit, an accurate valuation serves as the cornerstone for sound financial planning. 

At Kuvera Consulting, we offer tailored business valuation services designed to meet your specific business objectives and market conditions. Our expert team blends rigorous financial analysis with in-depth knowledge of regional market dynamics, ensuring your valuation is both precise and aligned with global standards.  

Reach out to us today to explore how our valuation expertise can help drive your company’s strategic success. 

To get in touch with us, please fill out the form on this page or reach out to contact@kuveraconsulting.com 

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