Valuing a Tech Company in the Middle East
Imagine you have built a successful tech company in the Middle East, offering technology solutions in the UAE and Saudi Arabia. Years of hard work have paid off, and now a big client, a multinational corporation, wants to buy your business.
But how do you decide the value of what you have achieved? This is the dilemma for the owners of this private tech company as they plan to sell the business they have built from scratch.
The Valuation Challenge
Valuing a private company in an emerging market is not easy. Without stock prices or market consensus, it’s a mix of growth potential, regional factors, and market competition. To navigate this dilemma, the owners enlisted KMEC, a trusted advisor for advisory services, to guide them through two contrasting valuation methods: the forward-looking Discounted Cash Flow (DCF) approach, which looks at the company’s future cash potential, and the EBITDA multiple method, which builds on current earnings strength.
With these valuations, the owners must negotiate with a savvy multinational buyer aiming to enhance its capabilities. Should they go with the optimistic DCF, the realistic EBITDA, or a mix of both? The multinational will examine every detail, but the tech company’s strategic advantage might influence the final price.
This case study explores valuation and negotiation in an emerging market, where ambition meets opportunity, and every decision impacts the outcome—a story of strategy, risk, and seeking fair value in a fast-changing tech world
Background
The technology company provided enterprise solutions focused on emerging sectors in the region. It had established a solid presence in the UAE and Saudi Arabia, benefiting from the region’s increasing demand for technology solutions. The firm served a diverse client base, including several large multinational companies.
One of these clients, a multinational corporation, had been a significant customer for years. Impressed by the technology company’s solutions and regional expertise, the multinational expressed interest in acquiring it to expand and build its own in-house capabilities. The owners considered this as a good opportunity to exit the business. However, they needed to establish a fair valuation of the business for negotiations.
The Challenge
Valuing a privately held technology company operating in an emerging market is complex. Unlike public companies with market-driven stock prices, these firms lack a clear benchmark. The valuation had to also take into account the organization’s growth potential in a region undergoing digital transformation, while also factoring the risks of a competitive and fast-changing industry.
To address this, the owners approached KMEC, a business consulting firm specializing in business valuations for companies in the Middle East. The firm was engaged to provide a range of valuations to support the owners in the negotiations it could have with the potential buyer.
Sangeetha Thomas , Sangeetha Thomas
