Sharper Analysis. Smarter Deals. Global Perspective.

In the world of M&A and strategic investments, good decisions don’t start with spreadsheets—they start with insight. Financial and commercial due diligence is the mechanism through which opportunity is validated, risk is quantified, and value is protected.

At the heart of successful due diligence lies not just a review of historical numbers, but an ability to interpret what those numbers mean within the broader commercial, operational, and regulatory context. This is particularly vital in complex jurisdictions like the UAE and across the wider MENA region—where transparency, tax frameworks, and business structures can vary widely and the public information is very limited.

Financial Due Diligence: Beyond the QoE

While Quality of Earnings (QoE) is central, comprehensive financial due diligence must probe deeper. Key focus areas include:

1. Working Capital Analysis – Defining the True "Business as Usual"

A business with unstable working capital cycles can lead to short-term valuation traps. As part of our due diligence, we analyze normalized working capital requirements based on historical trends, identify timing mismatches in receivables and payables, and adjust for seasonality or potential revenue manipulation near the cut-off date. This approach helps ensure that the purchase agreement includes an accurate working capital target, reducing the risk of post-close surprises.

2. Debt-like and Surplus Cash Items – Cleaning the Capital Stack

Debt-like obligations often lie beyond the traditional balance sheet, including accrued but unpaid expenses such as bonuses and taxes, regulatory penalties, operating lease liabilities, warranty obligations, deferred revenues, and non-core or restricted cash balances. Identifying and adjusting for these items is critical, as any misstatement can significantly distort the true enterprise value.

3. Revenue Quality & Customer Profitability

It’s not just what the top-line says, but how sustainable it is we dissect recurring vs. non-recurring revenues, contractual vs. transactional sales and Customer-level margin analysis, to uncover revenue concentration or high-cost dependencies. This offers a forward-looking view on revenue sustainability—critical in subscription and service-based businesses.

4. Tax & Compliance Exposure

In emerging markets, historic tax compliance and VAT liabilities can become deal blockers. We validate past tax filings and assessments, VAT registration and remittance trail and Potential penalties or open tax years under audit risk

Why Local Due Diligence Needs Global Awareness

In cross-border M&A, risks often originate from jurisdictional disconnects and cultural difference, where deal teams understand the financials but not the legal and regulatory nuances of the target's operating region.

This is where our global network adds unmatched strength:

Baker Tilly’s presence in over 140 countries, including extensive coverage across the globe, we bring:

• Local financial rules awareness (e.g., GAAP-to-IFRS conversions, VAT regimes, capital controls)
• On-ground validation of tax, payroll, or asset ownership documents
• Forensic and investigative insight when jurisdictional opacity or offshore structuring is involved

Common Red Flags Uncovered in Some of the Recent Engagements

A Real-World Scenario – Composite Industrial Group

In a recent financial due diligence engagement for a building materials manufacturing company operating across the UAE and KSA, our QoE analysis identified non-recurring income incorrectly recorded under ‘Other Revenues’. The review also revealed pending Zakat liabilities in KSA, off-balance sheet operating leases that required IFRS adjustment, and substantial intercompany receivables with no documented settlement history. Outcome was that the deal value was reduced by 18%. 

Final Thought: Due Diligence as a Value Lever

Strong due diligence is not just a check on historical accuracy—it’s a tool for repricing deals more fairly, mitigating post-close risk negotiating better terms and warranties and structuring for tax efficiency and governance continuity

In today’s environment of tight valuations and increased regulatory scrutiny, financial due diligence must be forensic in depth, global in scope, and commercial in its application.

Our Role in Enabling Confident Transactions

At Baker Tilly (UAE), we deliver partner-led, sector-focused financial due diligence, enhanced by AI and our global network, to provide both financial clarity and jurisdictional insight across borders.