How Do Interest Rates Affect Business Valuation in the UAE?

By Bill Anderson, FCCA, Chief Executive Officer, Assetica — 2026-10-02

Direct Answer: Higher interest rates lower business values through two routes. They raise the discount rate used in a DCF, so future cash flows are worth less today, and they raise the cost of the debt buyers use to fund purchases, so buyers can pay less. The effect of one 0.25 percentage point rise is small. A sustained run of rises is not, and the impact is largest for leveraged, long-duration and high-growth businesses.

On 17 September 2026 the Central Bank of the UAE raised the Base Rate on its Overnight Deposit Facility by 25 basis points, from 3.65% to 3.90%, following the US Federal Reserve. The dirham is pegged to the US dollar, so UAE policy rates follow US decisions. The announcement is published by the Central Bank of the UAE.

Owners ask the same question each time rates move: does my business now sell for less? This article answers it in terms you can apply to your own numbers, and separates what is mechanical from what is judgement.

Route one: the discount rate

A discounted cash flow valuation converts forecast cash flows into a present value using a discount rate, usually a weighted average cost of capital (WACC). The risk-free rate is an input to that rate. When benchmark rates rise, the risk-free component rises, and for the same forecast the present value falls.

Three points keep this in proportion:

A valuer does not copy the policy rate into the model. The risk-free input is normally taken from a long-dated government yield in the relevant currency, not from the overnight rate. A 25 basis point move in the Base Rate does not translate one for one into the WACC.
The effect depends on duration. A business whose value sits mainly in cash flows many years out, such as a start-up forecasting growth, is more sensitive than a stable business whose value is mostly near-term earnings.
The size of the move matters. A single quarter-point rise is within the range of ordinary judgement on a small-company discount rate. It would rarely change a conclusion by itself, and a valuer should say so rather than imply precision.

For how the discount rate is built and why it is a judgement, see our guide to DCF, WACC and the impact of UAE corporate tax on valuation.

Route two: what buyers can afford to pay

Most acquisitions of private companies use some borrowing. When the cost of debt rises, the same business supports less debt for the same interest cover, so a leveraged buyer can pay less or must put in more equity. Buyers who use no debt, including many strategic buyers and family offices, are less affected, although they also compare an acquisition against what cash earns on deposit.

This is why a rate rise tends to show up in negotiations before it shows up in published data. Buyers reopen price, ask for more of it to be deferred or tied to performance, and take longer to close. For sellers the practical response is preparation rather than price cuts: clean accounts, evidenced earnings and a defensible add-back schedule reduce the discount a cautious buyer applies.

Which businesses are most exposed

Highly leveraged companies. Higher interest cost cuts earnings to equity directly, and refinancing risk rises.
High-growth and pre-profit businesses. Their value is concentrated in distant cash flows, so they are the most discount-rate sensitive.
Capital-intensive businesses. Real estate, construction and logistics rely on financing for assets and projects.
Businesses whose buyers rely on debt. Mid-market sales to financial buyers are more sensitive than sales to a cash-rich strategic.

Asset-light, cash-generative service businesses with low debt are comparatively insulated.

Do multiples fall when rates rise?

Not mechanically. Multiples reflect growth, risk, rates and buyer demand together. In a period when rates are rising but sector earnings are growing and buyers are active, multiples can hold. Published UAE sector bands are reference ranges, not live prices, because no reliable public database of private UAE transactions exists. Our 2026 multiples reference table states how the bands are built, and why an owner's expected multiple often differs from a buyer's covers the gap between the two.

What owners should do now

Re-date the valuation. A valuation prepared before the September decision should be refreshed before it is used for a sale, a buy-out or a financing discussion.
Test the sensitivity. Ask for a range showing value at a discount rate one percentage point either side, so you can see how much of the answer depends on the rate.
Review your own debt. Check floating-rate facilities and the interest cover a lender or buyer will calculate.
Do not wait for a perfect market. Timing a sale to rates is unreliable. Our guide to the best time to sell a business sets out the factors that you can control.

Frequently asked questions

Did the September 2026 rate rise reduce my business value? Possibly by a small amount in a DCF, and by more if your business is leveraged or growth-dependent. The effect cannot be stated without your cash flows and capital structure.

Does the UAE set its own interest rates? The CBUAE sets the Base Rate, but because the dirham is pegged to the US dollar it follows US Federal Reserve moves.

Should I sell before rates rise further? Nobody can reliably forecast rates. Decide on your own readiness and the quality of your earnings.

Want to know what the new rate does to your value?

We can refresh your valuation with a discount-rate sensitivity so you can see the range, not a single figure. See our business valuation services.

Book a scoping call →

This article is general information, not investment, tax or legal advice, and not a valuation of any business. Rate figures are as published by the Central Bank of the UAE on 17 September 2026 and may have changed since.

Speak to Assetica about Business Valuation

Assetica is an independent business valuation firm in Dubai. We do not audit and we do not broker deals, so the number carries no conflict. Read more about business valuation, or book a free scoping call. Standard reports are issued in five to seven business days.