What To Know Before You Sell Your Business In The UAE
The journey to a successful business sale requires thorough preparation, strategic planning, and, most importantly, reliable support.
In this edition of Founder FAQ, Bidzi co-founder and CEO Akshay Dosaj and co-founder and COO Asif Rashid, answer: “What are the key pitfalls to avoid when one attempts to sell their business in the UAE?”
“Selling a business can be an exciting yet complex journey, especially for entrepreneurs navigating mergers and acquisitions (M&A) for the first time. The process can be complex, requiring careful planning and sound decision-making to maximize value and avoid potential pitfalls. Our guide below outlines common challenges first-time sellers face, and provides insights on how to navigate legal, financial, and operational aspects effectively, helping entrepreneurs achieve a smoother, more profitable transaction:
1. Minimize Dependence On Multiple Intermediaries
First-time sellers often turn to numerous intermediaries – M&A advisors, business brokers, lawyers, and escrow agents – only to find that this approach can quickly lead to excessive costs, delayed timelines, and miscommunication. A streamlined approach that relies on a single trusted advisor or a consolidated service provider can help reduce fees, while also ensuring a more coordinated and seamless process. Sellers should prioritize advisors who can provide accurate business valuation guidance, and legal and commercial support, and ensure secure completion and transfer of funds via escrow, which is essential for maintaining buyer trust.
2. Prioritize Robust Security Protocols
Security is paramount in M&A transactions. From the outset, its vital to ensure that comprehensive know-your-customer (KYC) and identity checks are conducted. The seller needs to be sure that the buyer is who they say they are before they engage in any form of dialogue and start disclosing confidential information. Establishing secure systems and processes early on safeguards both parties’ interests and builds credibility and trust, ensuring smoother negotiations and protecting sensitive business information.
3. Protect Confidentiality Diligently
Maintaining confidentiality is crucial to preserving business value and preventing any information leaks during the sale process. Ensuring that sensitive company data – such as financials, trade secrets, and client information – is well-protected not only helps maintain the business’s competitive edge but also ensures minimal disruption if the transaction were not to succeed. Confidentiality agreements and secure virtual data rooms provide the necessary safety measures required to proceed with a transaction confidently.
4. Navigate The Legal Landscape
Legal processes and documentation in M&A transactions can be daunting, particularly for first-time sellers. From listing the business for sale with accurate operational, financial, and legal information, to ensuring well-drafted and protective contracts are entered into legal requirements are exacting and should not be underestimated. While templates and simplified legal tools may seem cost-effective, they can introduce undue legal risks and vulnerabilities if not reviewed by professionals. First-time sellers will benefit from expert professional guidance to ensure that their contracts (including the non-disclosure agreement, letter of intent, and, most importantly, the share/asset sale and purchase agreement) not only meet the acceptable standards in the UAE, but that their interests are adequately protected, and the risk is properly apportioned between them and the buyer.
5. Approach Escrow Services Wisely
Escrow services provide a critical layer of security and protection, especially for high-value transactions. However, it’s not easy for smaller business owners to gain access to escrow services, and if they do, the costs can be disproportionate. In addition, not all providers offer the same level of reliability. Selecting a professional and reputable escrow agent reduces financial risk, besides safeguarding funds, and ensuring that both parties feel secure at the time of completion. A trustworthy escrow agent instills confidence and certainty, while also avoiding unnecessary conflict if one party is not acting professionally, or worse, attempts to be fraudulent.
Bidzi co-founder and CEO Akshay Dosaj and co-founder and COO Asif Rashid. Courtesy of Bidzi.
6. Foster Trust And Manage Risks
A successful sale relies heavily on a well-structured transaction framework that provides clarity and a roadmap for the transaction. It is important to follow certain steps to ensure transactions run smoothly, including starting with proper marketing materials, ensuring all buyers sign a non-disclosure agreement, making sure a letter of intent is agreed before proceeding to formal due diligence, and ensuring that due diligence is carried out via an organized and secure virtual data room. These initial steps are in addition to ensuring that a well-crafted sale and purchase agreement is prepared and signed, which will set out the final steps to completion as well as the processes and deliverables required at completion. Not to be overlooked is the vital importance of an escrow arrangement to provide much-needed security at completion. Following these steps not only provides structure but also fosters transparency and trust between the seller and the buyer, ultimately leading to a more efficient and harmonious transaction process.
For first-time sellers in the UAE, the journey to a successful business sale requires thorough preparation, strategic planning, and, most importantly, reliable support. Companies that offer comprehensive, end-to-end services – such as our company, Bidzi – make this process more manageable by providing streamlined solutions from valuation guidance and preparation of marketing materials to due diligence and expert legal support, while ensuring that all transactions are completed with a trusted escrow agent in place. By partnering with trusted advisors, avoiding common pitfalls, and following best practices, sellers can confidently navigate the M&A landscape, maximizing their business’s value, and establishing a solid foundation for success in the UAE’s thriving economy.”
This article first appeared in the December issue of Inc. Arabia magazine. To read the full issue online, click here.
