Safeguard Your Company: Mitigating Risks in Business Valuation
By Bill Anderson, FCCA, Chief Executive Officer, Assetica — 2024-08-08
Protect your business from valuation-related risks with Assetica's expertise. Understanding common pitfalls can save you significant time and money.
Common Risks That Reduce Business Valuation
The most significant valuation risks for UAE businesses include: earnings volatility without clear explanation; customer or supplier concentration above 30 to 40 per cent; undocumented contracts and verbal agreements; unresolved litigation or regulatory issues; related-party transactions without arm's-length terms; and a business model that is highly dependent on the founder's personal relationships.
How Assetica Mitigates Valuation Risk
Assetica's pre-sale valuation process identifies every material risk before a buyer's due diligence team does. We quantify the valuation impact of each risk and recommend specific actions to mitigate them. This approach protects your asking price in negotiations and reduces the likelihood of post-due-diligence price reductions.
Frequently Asked Questions
What is earnings normalisation and why does it matter for valuation?
Earnings normalisation adjusts your reported profits to remove one-off, non-recurring, or owner-specific items. For example, if you pay yourself above-market rent on a property you own personally, or include personal expenses through the business, these are normalised out to show the true sustainable earnings. Buyers pay multiples on normalised EBITDA, so accurate normalisation directly affects your valuation.
Can related-party transactions reduce my business valuation?
Yes. Transactions between your business and related parties that are not on arm's-length terms are a significant due diligence red flag. Buyers and investors discount businesses with unexplained or unfavourable related-party dealings. Assetica identifies and helps you address these before approaching the market.
Speak to Assetica about Strategic Value Advisory
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 strategic value advisory, or book a free scoping call. Standard reports are issued in five to seven business days.