Buying a company is a big decision. In the UAE, many businesses grow by acquiring other companies. But before you make that move, you must ensure that the company you want to buy is financially healthy. This is where financial due diligence becomes very important. At JAKS, we offer expert due diligence services in Dubai to help businesses check financial details, find possible risks, and make smart decisions before buying or investing.

What Is Financial Due Diligence?

Financial due diligence means checking the company’s financials before buying it. You look at its income, expenses, assets, debts, taxes, etc. This helps you determine the real value of the business and shows if there are any hidden problems.

Why Is It Important in the UAE?

Doing financial due diligence is very important in the UAE because:

• Some companies may look good from the outside, but have financial problems.
• You need to follow UAE laws and rules when buying a business.
• You can avoid surprises after the deal.
• It helps you make the right decision and pay the right price.

Step-by-Step: How to Do Financial Due Diligence in the UAE

Here’s a simple guide to help you check the financial health of a company before buying it:

1. Collect All Financial Statements

Ask the company for its financial records for the last 3 to 5 years. These should include:

• Income statement (how much money the company makes and spends)
• Balance sheet (assets and debts)
• Cash flow statement (money coming in and going out)

Certified accountants may audit some companies in the UAE. If they are not, you should be extra careful when checking the numbers.

2. Understand the Earnings

Check how the company earns its money. You want to know:

• Is the income steady every year?
• Is the profit coming from normal business or one-time deals?
• Are there any strange or big changes in profit?

This helps you know if the company is profitable or not.

3. Check Debts and Liabilities

Find out how much money the company owes. Companies may have loans, unpaid bills, or pending cases in the UAE. Check for:

• Bank loans and interest
• Unpaid supplier bills
• Rent or lease payments
• Legal claims or court cases

You don’t want to buy a company with too much debt.

4. Verify Assets

Look at what the company owns. This includes:

• Buildings or offices (especially in UAE free zones or the mainland)
• Vehicles or equipment
• Inventory or stock
• Cash and bank balances

Make sure these assets are real and are not overvalued.

5. Review Working Capital

Working capital means the money a company needs to run daily. Check:

• What the company owns in the short term (like cash or inventory)
• What it owes in the short term (like unpaid bills)

If a company has low working capital, it may have cash problems.

6. Check Tax Compliance

In the UAE, companies must now follow Corporate Tax rules (starting from 2023 for many businesses). Also, VAT (Value Added Tax) is 5%. So, you must check:

• Has the company filed its VAT returns properly?
• Are there any unpaid taxes?
• Is the company registered for UAE Corporate Tax?

Any tax problem can become yours after the purchase, so be careful.

7. Review Financial Forecasts

Some companies in the UAE will show you their plans or targets. This can include:

• Expected sales
• Growth plans in Dubai, Abu Dhabi, or other Emirates
• Expansion to GCC countries

Ask questions like:

• Are these goals realistic?
• Are the assumptions correct?
• Do they match past performance?

Don’t unquestioningly believe future promises. Check if they make sense.

8. Check Internal Controls

Ask how the company manages its money and records. Do they use proper software? Do they keep clear records? In the UAE, many companies use systems like Tally, Zoho, or ERP systems. A company with poor systems might make costly mistakes.

Things to Remember in the UAE

• Free Zone vs. Mainland: Rules may change depending on where the company is registered.
• Arabic Documents: Some documents may be in Arabic. Make sure to get translations if needed.
• Hire Experts: Working with an UAE-based accountant or financial advisor for help is smart.
• Government Portals: You can check trade licenses, VAT status, and company history using portals like the Ministry of Economy or the Federal Tax Authority (FTA).

Financial due diligence is one of the most important steps before buying a company in the UAE. It helps you avoid future problems and ensures your investment is safe. Don’t rush the process. Take your time to understand the full financial picture.

If needed, get support from UAE-based professionals who understand local laws, taxes, and financial systems. This will help you make a confident and informed decision.

JAKS is a trusted consultancy firm in Dubai that helps businesses with due diligence for smooth mergers and acquisitions. We also offer business advice, bookkeeping, tax filing, payroll, monthly financial reports, and more. Our safe system protects your financial information and makes the due diligence process easy and worry-free. For reliable due diligence services in Dubai, call +971 503372712 or email [email protected].