UAE acquisition question
What Are Debt-Like Items in a UAE Acquisition?
Debt-like items are obligations that may not appear as conventional bank debt but can still reduce the economic value transferred to the buyer. There is no universal definition. The key question is: Is this an obligation created before completion that the buyer will have to fund after completion?
Conventional debt
The analysis usually starts with:
- bank loans;
- overdrafts;
- shareholder loans;
- finance arrangements.
It then moves to less obvious liabilities.
Employee-related obligations
Potential exposures may include:
- accrued bonuses;
- commissions;
- leave balances;
- end-of-service obligations.
Whether these are treated as working capital, debt-like items or another category depends on the agreed transaction mechanics.
Tax exposures
Historic corporate-tax, VAT, customs or compliance liabilities can also affect value.
The UAE corporate-tax regime applies to tax periods beginning on or after 1 June 2023, and the Federal Tax Authority provides specific guidance on restructuring and related reliefs.
Tax treatment should be reviewed by qualified advisers.
Related-party balances
Owner-managed businesses may contain balances with shareholders, sister companies or related parties.
Each material balance should be understood and classified appropriately before completion.
Deferred spending
A company may also have postponed necessary capex or maintenance.
There may be no formal liability on the balance sheet, but the buyer still faces an immediate cash requirement.
Commercially, that matters.
Contingent obligations
Other exposures may include:
- bank guarantees;
- litigation;
- warranty claims;
- performance obligations;
- customer deposits.
Crowe UAE identifies hidden debt, working capital, related-party transactions and tax exposure as recurring financial-diligence issues.
Conclusion
Debt-like analysis helps prevent the buyer from paying twice:
once through the headline valuation, and again after closing when historic obligations require cash.
Keel Partners supports buyers with commercial transaction analysis and diligence coordination. Accounting, tax and legal classification should be confirmed by qualified advisers.
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