Acquisitions and investments in the UAE require independent financial scrutiny that goes far beyond audited accounts. Essence delivers rigorous buy-side and sell-side financial due diligence — quality of earnings analysis, working capital assessment, tax exposure review, and UAE-specific risk identification — so you transact with confidence.
Whether you are acquiring a business, preparing for a sale, or evaluating an investment, Essence provides the independent financial analysis your transaction requires.
Commissioned by the buyer or investor to independently verify the target’s financial performance, quality of earnings, and risk profile before committing capital. Protects against overpaying and surfaces issues for price adjustment or deal structuring.
Commissioned by the seller before going to market. An independent VDD report presented to prospective buyers accelerates the process, increases buyer confidence, supports the asking price, and reduces the risk of late-stage price chips.
Standalone or combined with financial DD, our tax due diligence reviews the target’s UAE Corporate Tax, VAT, and transfer pricing compliance — quantifying tax exposure that becomes an acquisition liability or informs indemnity provisions in the SPA.
A comprehensive Essence FDD engagement analyses every dimension of the target’s financial performance and risk that is material to your transaction decision.
Adjusts reported EBITDA to reflect sustainable, recurring performance. Removes one-off revenues, owner-specific costs, non-arm’s-length related party transactions, and accounting policy differences to produce a normalised earnings base for valuation.
Determines the ‘normalised’ working capital level for the SPA working capital mechanism. Analyses 12–24 months of trade receivables, payables, inventory, and accruals — including UAE VAT positions, WPS timing, and seasonal patterns.
Identifies all debt and debt-like items that should reduce the equity value: bank loans, director loans, deferred revenue, warranty provisions, under-accrued gratuity, unfunded pension commitments, lease obligations (IFRS 16), and contingent liabilities.
Assesses revenue quality, customer concentration risk, contract length and renewal probability, pipeline reliability, and the impact of key-man dependency. Revenue from the top 5 customers is stress-tested for acquisition retention risk.
Reviews the completeness and recoverability of balance sheet assets: trade receivable recoverability, inventory obsolescence, fixed asset condition and carrying value, intangible asset recognition, and off-balance-sheet commitments and contingencies.
Reviews UAE Corporate Tax registration and return accuracy, VAT compliance, transfer pricing documentation, free zone QFZP eligibility, FTA audit history, and any open regulatory correspondence — quantifying tax exposure that survives a share acquisition.
Assesses the quality of accounting records and compliance with IFRS requirements: revenue recognition (IFRS 15), lease accounting (IFRS 16), financial instruments (IFRS 9), and any departures from IFRS that affect reported earnings or net assets.
Identifies and adjusts for non-arm’s-length transactions between the target and its owners or related entities — a common feature of UAE SME financial statements. Related party revenues, management charges, intercompany loans, and rental arrangements are all reviewed.
Reviews the adequacy of end-of-service gratuity accruals under UAE Labour Law, WPS payroll compliance, visa and labour card status, and any undisclosed HR disputes or MOHRE complaints — a frequently under-accrued liability in UAE SME acquisitions.
UAE acquisitions present risks that advisors without deep UAE knowledge routinely miss. Essence identifies all of them.
UAE Corporate Tax at 9% applies from June 2023 financial years. Has the target registered, filed returns, and paid CT correctly? Unquantified CT liabilities — including penalties for late registration (AED 10,000) and incorrect returns — transfer to the acquirer in a share deal. CT errors can be hard to detect without specialist review.
A target operating in a UAE free zone may qualify for 0% Corporate Tax as a Qualifying Free Zone Person (QFZP). However, QFZP status requires strict compliance with substance, revenue, and accounting requirements. Post-acquisition activities that breach QFZP conditions can result in the entire entity losing the 0% rate — a significant unmodelled tax cost.
VAT errors in a UAE target — missed output tax on supplies, incorrect reverse charge on imports, over-recovered input tax on blocked items — are acquired with the business in a share deal. The FTA can audit the target for up to 5 years from the relevant tax period. VAT exposure of 5% of turnover can materially affect deal economics.
UAE SME financials frequently include non-arm’s-length transactions that inflate apparent profitability: management fees to owner entities, related party revenues at above-market rates, shareholder loans charged at zero interest, and below-market rent for owner-occupied premises. These distortions must be identified and normalised before EBITDA-based valuation.
UAE Labour Law requires end-of-service gratuity of 21–30 days per year of service for all employees. Many UAE SMEs fail to accrue this liability correctly — particularly for long-serving employees. The shortfall represents a real acquisition liability that reduces net assets. Essence calculates the full gratuity liability based on current headcount and tenure data.
UAE Corporate Tax requires businesses with related party transactions above certain thresholds to maintain a Transfer Pricing (TP) disclosure form and, for large groups, a TP local file. Failure to maintain adequate TP documentation exposes the target to FTA penalties. Acquirers of businesses with cross-border related party transactions must review TP compliance carefully.
A structured, five-phase process ensures thorough coverage within your transaction timeline — without disrupting the deal momentum.
We discuss the transaction context, agree the scope of work, execute a strict non-disclosure agreement, and issue a fixed-fee engagement letter. We also review the data room index to assess information completeness and flag any gaps before fieldwork begins.
Structured review of financial statements (3 years minimum), management accounts, trial balance, bank statements, receivables and payables ageing, tax returns, and key contracts. Preliminary quality of earnings and working capital analysis is completed. Red flags are identified within the first 5 working days.
Structured sessions with the target’s management team and finance function to clarify accounting policies, understand key business drivers, validate preliminary findings, and obtain explanations for unusual or unexplained items. Management Q&A responses are documented and tested against the data room evidence.
Detailed QoE analysis, working capital normalisation, debt bridge, net assets review, and UAE tax due diligence are completed. All adjustments are quantified with clear basis and supporting evidence. A draft findings paper is shared with the client before the final report is issued.
A comprehensive FDD report is issued — covering QoE, working capital analysis, debt and debt-like items, net assets, UAE tax exposure, and key risks with recommended SPA protections. Essence remains available to support SPA negotiations, working capital mechanism drafting, and post-signing queries.
Providing complete financial records from the outset accelerates the DD timeline. A well-organised data room reduces elapsed time and management disruption.
Not all advisors understand the UAE regulatory environment well enough to identify the risks that matter in a UAE transaction.
We understand UAE Corporate Tax, VAT, free zone regulations, labour law, and AML requirements in depth — enabling us to identify UAE-specific risks that generalist advisors miss.
Every FDD engagement is led by a senior partner with direct M&A due diligence experience — not delegated to junior staff. You speak directly to the person doing the work.
Our reports are structured to directly support SPA negotiation — with clear findings on working capital peg, debt items, tax exposure, and recommended warranty and indemnity provisions.
We execute a comprehensive NDA before accessing any data. All engagement information is handled under strict confidentiality protocols and never shared with third parties.
Fixed-fee engagements. No billing surprises. All pricing is agreed upfront before work begins. A free scoping call is the starting point for every engagement.
All engagements begin with a free scoping call. Fixed fee confirmed before any work commences. NDA executed at no cost.
Get a free scoping call with a senior Essence partner. We will assess the engagement scope, agree a fixed fee, and tell you exactly what we need to get started — all within 24 hours.
