Introduction
Entering into a partnership or acquiring a business in the UAE can offer strong growth opportunities. However, before finalising any deal, it is important to conduct proper due diligence, often with the support of experienced advisors such as Farahat & Co . Due diligence helps identify risks, verify information, and ensure that the choice is legally and financially sound. Below is a clear checklist to guide the due diligence process in the UAE.
Understanding the Business Structure
The first step is to understand the legal structure of the company. Check if the business is registered in the mainland, free zone, or offshore area. Review trade licenses, registration certificates, and ownership details. Confirm that the company is operating within the scope mentioned in its license. Any mismatch may lead to legal issues later.
Financial Due Diligence
Financial review plays a critical role in the due diligence process. Examine audited financial statements, bank records, tax filings, and cash flow reports. Check for outstanding debts, loans, or unpaid liabilities. It is also necessary to review profit trends, expenses, and revenue sources to understand the true financial position of the business.
Legal and Compliance Review
Legal due diligence ensures that the company follows UAE laws and regulations, and this process is often supported by professional due diligence services to uncover potential risks. Review contracts, agreements, and ongoing legal cases, if any. Check compliance with labour laws, visa rules, and regulatory requirements. Ensure there are no pending fines, penalties, or legal disputes that could affect the partnership or acquisition.
Operational Assessment
This step focuses on how the business operates daily. Review internal processes, supply chain systems, and operational efficiency. Assess whether the business has strong management practices and reliable vendors. Understanding operations helps determine whether the company can continue to perform well after the deal.
Human Resources and Workforce Review
Employees are a key asset of any business. Review employment contracts, salary structures, benefits, and visa status of staff. Check if there are any labour disputes or high employee turnover. This step helps avoid future HR-related problems and ensures workforce stability.
Market and Commercial Evaluation
Study the company’s position in the market: Analyse competitors, customer base, and demand for products or services. Review key client contracts and partnerships. Understanding market risks and growth potential helps in deciding whether the deal aligns with long-term goals.
Risk Identification and Mitigation
Identify financial, legal, operational, and reputational risks. Once risks are identified, assess how they can be managed or reduced. This step supports better decision-making and deal discussions.
Conclusion
Due diligence is a critical step in partnerships and acquisitions in the UAE. It provides clarity, reduces risks, and protects investments. By carefully reviewing legal, financial, operational, and market aspects, businesses can make informed decisions. A structured due diligence checklist ensures transparency and builds a strong foundation for a successful partnership or acquisition.
