What a business is worth in the UAE: mainland vs free zone
Value Up editorial team · · 5 min read
In the UAE, two companies with the same profit can be worth different amounts. One reason is where the business is registered: on the mainland or in a free zone. A buyer values not only the numbers but what stands behind the licence.
How mainland and free zone differ
- market access: a free-zone company is generally limited in trading directly with the local market and uses special arrangements for it; a mainland company usually does not face that limit;
- tax: the UAE has introduced a corporate tax, and free-zone companies may qualify for a favourable regime on certain types of income when conditions are met;
- ownership: for most activities full foreign ownership is allowed in both;
- premises and licence: lease terms, duration and licence type differ from zone to zone.
What this means for value
A buyer asks one question: can the same profit be earned after the owner changes. So they check whether the licence moves with the shares or a new one is needed, how much the business depends on the terms of that particular zone, and whether it can reach the customers who bring in the revenue.
Currency and comparability
The UAE dirham is pegged to the US dollar, so comparing with deals abroad is usually not distorted by the exchange rate. The comparability of the companies themselves still has to be checked: size, industry and dependence on the owner affect the multiple as much as the registration does.
How to prepare for a valuation
- gather the licence, incorporation documents and the lease in one place;
- back up revenue and profit with documents for several periods;
- spell out exactly how your business reaches customers given the zone’s limits;
- show that the business runs without the owner’s constant involvement.
For information only. This is not a licensed appraiser’s opinion and not legal or investment advice.