Why Company Valuations Differ in UAE & KSA | 4 Steps of Business Valuation Guide

In the dynamic business landscapes of the United Arab Emirates (UAE) and Saudi Arabia (KSA), a common question puzzles founders, investors, and financial professionals: How can two expert valuations of the same company yield dramatically different figures? This discrepancy isn’t necessarily a sign of error or deception; rather, it’s a fundamental reflection of how business valuation is as much an art as it is a science.

For a growing technology startup in Dubai’s DIFC seeking investment, or a family-owned manufacturing business in Riyadh considering a sale, understanding these valuation differences is critical. A higher valuation might secure better financing terms, while a lower one could affect exit strategies. At Ghalib Consulting, with our deep expertise in financial modeling and valuation across the Middle East, we regularly navigate these complexities to provide clarity and strategic advantage for our clients.

This article explores the key reasons behind valuation disparities and what businesses in the GCC region should know.

https://images.unsplash.com/photo-1553877522-43269d4ea984?ixlib=rb-4.0.3&auto=format&fit=crop&w=1200&q=80
Image: Valuation is a complex blend of data analysis, market insight, and strategic forecasting.

1. The Core Purpose: Why Are We Valuing This Business?

The single most important factor driving valuation differences is purpose. Valuations are not conducted in a vacuum—they serve specific objectives that dictate methodology and assumptions.

Different Purposes Lead to Different Numbers:

For Mergers & Acquisitions (M&A): A strategic buyer (like a larger competitor in KSA’s industrial sector) may pay a “strategic premium.” They value synergies—cost savings, cross-selling opportunities, or market access—that a financial buyer wouldn’t. This can significantly inflate the valuation.
For Securing Bank Financing: Lenders in the UAE are inherently risk-averse. Their valuation (often for collateral purposes) tends to be conservative, focusing on tangible assets and worst-case scenarios to protect their loan.
For Dispute Resolution or Litigation: In shareholder disputes or divorce proceedings, valuations can become adversarial. One side may advocate for a higher “fair market value,” while the other argues for a lower “liquidation value.”
For Internal Strategic Planning: Management might use a more optimistic, forward-looking valuation to assess growth initiatives, using internal projections that an external party would scrutinize more heavily.

The Bottom Line: Always ask, “Valuation for what?” The answer sets the entire valuation trajectory.

2. The Methodology Maze: DCF, Comps, and Precedents

Professional valuers use distinct methodologies, each with its own lens and inherent assumptions. Using different methods is a primary source of variation.

A. Discounted Cash Flow (DCF) Analysis: The Future Lens

This method values a company based on its projected future cash flows, discounted back to their present value. It’s highly sensitive to two key assumptions:

Growth Rate Projections: A small change in the estimated long-term growth rate (say, 5% vs. 7%) can alter the valuation by millions. In high-growth markets like Saudi Arabia’s renewable energy or tech sectors, these projections are particularly volatile.
Discount Rate (Weighted Average Cost of Capital – WACC): This reflects the risk of the investment. A valuer who perceives the Saudi market or a specific industry as high-risk will use a higher discount rate, resulting in a lower present value. Differences in estimating risk-free rates (influenced by local interest rates) and equity risk premiums directly cause valuation gaps.

B. Comparable Company Analysis (Comps): The Market Lens

This approach values a business relative to similar publicly traded companies, using multiples like Price-to-Earnings (P/E) or Enterprise Value-to-EBITDA.

Selection of “Comparables”: Which companies are truly comparable? A valuer might choose regional GCC peers, while another selects global leaders. The chosen peer set’s trading multiples will directly transfer to the target company.
Adjustments for Size, Growth, and Risk: A private SME in Sharjah is inherently riskier and less liquid than a listed blue-chip. The size of the discount applied for this illiquidity (the “discount for lack of marketability”) is subjective and varies between valuers.

C. Precedent Transactions Analysis: The Acquisition Lens

This method looks at prices paid for similar companies in past M&A deals.

Relevance of Past Deals: A transaction from 2019 in the UAE’s logistics sector may not be relevant for a 2024 valuation, given post-pandemic market shifts and Saudi Arabia’s massive logistics investments under Vision 2030.
Availability of Data: Transaction details in the private Middle Eastern market are often confidential. One valuer might have access to a more relevant, recent dataset than another.

https://images.unsplash.com/photo-1559526324-4b87b5e36e44?ixlib=rb-4.0.3&auto=format&fit=crop&w=1200&q=80
Image: Different valuation methods provide different perspectives, like viewing an object through various lenses.

3. The Assumption Quagmire: Where Subjectivity Enters

Even when two analysts use the same DCF model, their outputs will differ due to subjective assumptions.

Forecast Period & Terminal Value: How many years of detailed projections are used? The terminal value (representing all cash flows beyond the forecast period) often constitutes 60-70% of a DCF valuation. Small changes in the perpetual growth rate here have an enormous impact.
Normalization Adjustments: For owner-managed businesses, valuers must “normalize” earnings by adjusting for discretionary expenses (excessive owner salaries, personal travel booked as business expense). One valuer’s aggressive adjustment is another’s conservative estimate.
Risk Assessment: Quantifying country risk in KSA versus political stability in the UAE, or sector-specific risks in real estate versus healthcare, is inherently subjective.

4. Regional Nuances in the UAE & KSA Markets

Valuations in the GCC must account for unique local factors:

Free Zone vs. Onshore Entities: A company operating in the ADGM (Abu Dhabi Global Market) may be valued differently than a similar onshore LLC due to perceived regulatory and ownership advantages.
Vision 2030 Impact: Businesses aligned with Saudi Arabia’s Vision 2030 goals (e.g., tourism, entertainment, renewable energy) may command a “strategic alignment premium” from certain investors.
Family-Owned Business Dynamics: Many Gulf businesses are family-owned. Valuations must consider succession plans, family governance, and potential discounts for minority ownership stakes, which are assessed differently across firms.

Navigating Valuation Differences: A Strategic Guide for Business Leaders

Seek Clarity on Purpose: Before commissioning a valuation, define its precise purpose. This will guide the valuer’s approach.
Understand the “Range of Fairness”: Accept that valuation is not a single point but a range. A well-supported valuation should present a reasonable bracket.
Request Multiple Methodologies: A robust valuation report from a firm like Ghalib Consulting will typically employ two or three methods, reconciling them to arrive at a final value. This triangulation increases credibility.
Scrutinize Key Assumptions: Don’t just look at the bottom-line number. Engage your advisor in a detailed discussion about growth rates, discount rates, and comparable selections. Why were certain assumptions made?
Choose a Valuation Partner with Regional Expertise: The value of a business in Jeddah is not assessed the same as one in London. Work with advisors who understand local market dynamics, regulatory frameworks, and investor sentiment in the UAE and KSA.

How Ghalib Consulting Delivers Precise, Defensible Valuations

At Ghalib Consulting, we bridge the gap between art and science in business valuation. For our clients across the Middle East, we:

Provide Purpose-Driven Analysis: We align our methodology directly with your strategic goal—be it M&A, fundraising, or restructuring.
Apply Rigorous, Multi-Method Approaches: We cross-verify conclusions using DCF, market comparables, and transaction precedents to ensure robustness.
Incorporate Local Market Intelligence: Our on-the-ground expertise in UAE and KSA markets allows us to make informed, realistic assumptions about growth, risk, and marketability.
Deliver Transparent Reporting: We clearly document every assumption, allowing you to understand exactly how the valuation was derived and defend it to stakeholders.

A transparent, well-documented valuation is a powerful tool for negotiation, securing investment, and strategic planning.

Conclusion: Embracing Valuation as a Strategic Tool

The divergence between two valuations is not a flaw in the system but a reflection of its nuanced reality. It underscores that a company’s worth is not an immutable fact but a perspective-informed estimate tied to purpose, methodology, and assumption.

For business leaders and investors in the UAE and Saudi Arabia, the key takeaway is to move beyond seeking a single “correct” number. Instead, focus on understanding the drivers of value within your specific context. By demystifying the process and partnering with experienced advisors like Ghalib Consulting, you can transform valuation from a point of confusion into a strategic asset for growth, negotiation, and long-term success.

Ready to gain clarity on your company’s true value in the Middle Eastern market?

📞 Contact Ghalib Consulting Today for a comprehensive, defensible business valuation.
📧 ghalib@ghalibconsulting.com | 📞 *+966-50-7024644*

Why Company Valuations Differ in UAE & KSA |4 Steps of Business Valuation Guide

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