What are the different methods used for business valuation in the United Arab Emirates

Let’s learn how a business valuation in UAE works.

At all times, a company’s management’s goal is to maximize the shareholders’ wealth and the company’s worth. Several business valuation methods in the UAE figure out how much a company is worth by doing that.

Contrarily, these models rely on judgmental inputs, which you will develop via experience. It is the predicted worth of a corporation that is the focal point when employing any of these many ways to set a price on any organization.

When seeking funding, selling your company, or just wanting to confirm your assumptions about its worth, a business valuation study maybe a useful tool. There are many companies offering Business valuations in the UAE that help you find out how much your firm is worth, but before you choose one, make sure you know what they do and don’t do.

Business valuation methods in the UAE

What makes a company valuable is its ability to succeed in the years to come. Therefore, it isn’t sufficient to only look at a company’s success records. To forecast how much money it may make in the future, we also need to assess its:

  • present culture
  • internal resources
  • intellectual capital

This is why business valuation methods in the UAE are necessary. Let’s first learn how a business valuation in UAE works.

Understand the importance business valuation in the UAE

No matter a company’s structure, size, or sector, it is essential to have Business valuation in UAE services done to guarantee an accurate appraisal. You’ll need to know a lot about financial analysis tools and be able to discuss and plan a deal in order to figure out how much a company is worth.

Business valuation in UAE is significant for several reasons:

  • It knows exactly where your company is right now, so you can see how it stacks up against the competition. You may track the development and evolution of your firm with the help of a business valuation in UAE.
  • It also establishes the foundation for your business’s financial value.
  • Using the results of this preliminary analysis, you may better plan your company’s future, establish your marketing priorities, and formulate your financial targets.
  • Many organizations seek Business valuation companies in UAE to measure their development and innovation potential.

What are the legal requirements for business valuation in UAE?

If you own a business in Dubai, you need a professional valuer to write a report estimating your firm’s worth. When considering a merger, acquisition, or investment opportunity, the valuation should serve as an outline for prospective investors, banks, and other financial institutions.

  • In Dubai, you need to register your business with the Department of Economic Development (DED) before you can get a business valuation in UAE.
  • Following registration, you can submit an application for a business license. DED usually takes around two weeks after receiving an application, any necessary supporting papers, and payment information to contact the applicant.
  • Once the concerned authorities receive your application, they will work on it immediately.

What are the different business valuation methods in the UAE

It is important to consider the nature of the business and its intended use when deciding how to value it. Here are a few popular approaches to determining a company’s worth:

business valuation methods in the UAE

Net Assets value method

A company’s net worth is equal to its net asset value of the firm. Net assets, also known as net worth, are the difference between a company’s assets and its liabilities. It shows the market value of a fund per unit when presented as a per-share value. At the price of the per-share value, investors have the opportunity to purchase or sell units of the fund.

Example for Net Asset Value Method in UAE

Let’s consider a small company, Ease Limited, which is a retail store with a balance sheet that looks like this:


  • Cash – AED 10,000
  • Inventory – AED 50,000
  • Property, Plant, and Equipment (PP&E) – AED 100,000
  • Intangible Assets (e.g., trademarks, patents) – AED 20,000
  • Total Assets – AED 180,000


  • Current Liabilities (e.g., accounts payable, taxes owed) – AED 30,000
  • Long-term Liabilities (e.g., loans, mortgages) – AED 50,000
  • Total Liabilities – AED 80,000

Net Assets:

To calculate the net asset value, we subtract the total liabilities from the total assets:

  • Net Assets = Total Assets – Total Liabilities
  • = AED 180,000 – AED 80,000
  • = AED 100,000

This means that the net asset value of Ease Limited is AED 100,000.

Liquidation value method

The liquidation value of an asset is the estimated ultimate value that the holder of a financial instrument will get upon selling the asset, usually in a fast sale procedure.

When a company declares bankruptcy, its assets are usually liquidated and sold off rapidly, sometimes for very little compared to their initial worth. A liquidation value business valuation in UAE should not include intangible assets like goodwill, brand awareness, or intellectual property.

Example for Liquidation Value Method in UAE

Let’s consider the assets and liabilities of Grow Ltd., in the UK:

Assets (Liquidation Values):

  • Property – AED 400,000 (Book Value: AED 500,000)
  • Equipment – AED 50,000 (Book Value: AED 100,000)
  • Inventory – AED 20,000 (Book Value: AED 20,000)
  • Accounts Receivable – AED 20,000
  • Cash – AED 20,000
  • Total Liquidation Assets – AED 510,000


  • Current Liabilities – AED 50,000 (Accounts Payable: AED 40,000, Short-term Loans: AED 10,000)
  • Long-term Liabilities – AED 150,000

Total Liabilities: AED 200,000

Liquidation Value Calculation:

  • Liquidation Value = Total Liquidation Assets – Total Liabilities
  • Liquidation Value = AED 510,000 – AED 200,000 = AED 310,000
  • So, the liquidation value of Grow Ltd. is AED 310,000.

Capitalised Earnings Basis

The capitalized earnings technique views a business as an investment. Thus, the future earnings predictions, risks, and profitability of the firm are the only things being considered. These business valuation methods in UAE require estimating the company’s profits for two to five years after valuation. It is crucial to specify that the aforementioned relates to adjusted profits.

Example for Capitalized Earning Basis in UAE

Let’s consider a small company, Bloom Ltd, which has the following financial information:

  • Average annual net profit for the last three years: AED 100,000
  • Appropriate capitalization rate: 20%

To calculate the business value using the capitalized earnings method, we divide the average annual net profit by the capitalization rate:

  • Business Value = Average Annual Net Profit / Capitalization Rate
  • = AED 100,000 / 0.20
  • = AED 500,000

Based on the capitalized earnings method, Bloom Ltd’s estimated value is AED 500,000, representing the present value of the company’s future earnings, assuming the current level of profitability continues indefinitely. A higher capitalization rate will result in a lower business valuation, while a lower rate will increase the valuation.

Cost approach

The cost method, sometimes known as the asset-based approach, is a method for business valuation in UAE that involves tallying up its net assets and their fair market value. It provides information on the true value of the business’s assets and the owner’s capacity to sell or otherwise dispose of them.

Example for Cost Approach in UAE

Let’s consider the assets and liabilities of GHI Ltd., in the UK:

Assets (Replacement Cost):

  • Property – AED 500,000
  • Equipment – AED 100,000
  • Inventory – AED 50,000
  • Accounts Receivable – AED 30,000
  • Cash – AED 20,000

Total Replacement Cost of Assets – AED 700,000


  • Property (20%) – AED 100,000
  • Equipment (40%) – AED 40,000

Total Depreciation – AED 140,000

Depreciated Replacement Cost of Assets – AED 700,000 – AED 140,000 =AED 560,000


  • Current Liabilities – AED 50,000 (Accounts Payable: AED 40,000, Short-term Loans: AED 10,000)
  • Long-term Liabilities – AED 150,000

Total Liabilities: AED 200,000

Net Asset Value (NAV) Calculation:

  • NAV = Depreciated Replacement Cost of Assets – Total Liabilities
  • NAV = AED 560,000 – AED 200,000 = AED 360,000

So, the cost approach valuation of GHI Ltd. is AED 360,000.

Market approach

If you want to know how much a firm is worth, the market method is your best bet. This method involves looking at similar businesses in the same sector and analyzing their deals over the last year. Using these business valuation methods in UAE, business analysts may compare the firm in question to its rivals and identify any discrepancies in pricing strategies, profit margins, or other key performance indicators.

Example for Market Approach in UAE

Let’s consider a small IT consulting firm, Teal Ltd.

Identify Comparable Companies:

Find recently sold companies in the same industry with similar size and market position.

  • Company A – Enterprise Value (EV): AED 1,200,000, EBITDA – AED 300,000
  • Company B – Enterprise Value (EV): AED 1,600,000, EBITDA – AED 400,000
  • Company C – Enterprise Value (EV): AED 1,500,000, EBITDA – AED 375,000

Calculate the EV/EBITDA Multiples and their Average:

  • Company A – EV/EBITDA = AED 1,200,000 / AED 300,000 = 4.0
  • Company B – EV/EBITDA = AED 1,600,000 / AED 400,000 = 4.0
  • Company C – EV/EBITDA = AED 1,500,000 / AED 375,000 = 4.0
  • Average EV/EBITDA multiple = (4.0 + 4.0 + 4.0) / 3 = 4.0

Apply multiple to Teal Ltd.

  • Assume Teal Ltd. has an EBITDA of AED 250,000.
  • Valuation = Average EV/EBITDA multiple * EBITDA of Teal Ltd.
  • Valuation = 4.0 *AED 250,000 = AED 1,000,000

So, the market approach valuation of Teal Ltd. is AED 1,000,000.

Discounted Cash Flow (DCF)

The discounted cash flow (DCF) method determines a company’s worth by adding the terminal value to the present value (PV) over a certain time period and then adjusting for the discount rate. You should use projected cash flows instead of “target” cash flows.

Example for Discounted Cash Flow Basis in UAE

Consider a prominent UAE hotel chain with steady cash flow and moderate growth. To value this company, we’ll use a 12% discount rate reflecting its risk.

Steps for DCF Valuation:

Forecast Cash Flows: Project future cash flows. Here’s a sample for the next five years:

  • Year 1 – AED 5,000,000
  • Year 2 – AED 5,500,000
  • Year 3 – AED 6,000,000
  • Year 4 – AED 6,500,000
  • Year 5 – AED 7,000,000

Terminal Value: Assume a 2% perpetual growth rate after year 5.

Discount Cash Flows: Discount each year’s cash flow to present value using the 12% discount rate. The present value (PV) of each cash flow can be calculated using the formula: PV = Cash Flow / (1 + discount rate)^number of years

The present values of cash flows are:

  • Year 1 – AED 4,464,286
  • Year 2 – AED 4,384,566
  • Year 3 – AED 4,270,681
  • Year 4 – AED 4,130,868
  • Year 5 – AED 3,971,988
  • Terminal Value – AED 71,400,000

Total Present Value: Sum the present values of all cash flows and the terminal value. This gives us the company’s valuation of AED 92,622,389.

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