Paying the Right Price: How a Rigorous M&A Process Protects Family Office Buyers

5 min 51 sec August 19, 2026 (Edited)

Written by

Richard Catling

Partner

r.catling@tamimi.com View LinkedIn Profile

Michael Jennings

michael@awadcapital.com View LinkedIn Profile

Family offices have become active buyers in the region. Their patient capital and relationship-led approach are real advantages, but only when paired with institutional standards of financial discipline around valuation, quality of earnings, working capital, and cash conversion.

Why pricing discipline matters

Family offices occupy an increasingly important position in the GCC and wider MENA M&A market. They bring patient capital, concentrated decision making, and a long-term ownership horizon. For a founder or a family-owned business considering a sale, those are attractive qualities, especially where the seller cares about what happens to the company, its people, and its name after the exit.

Whereas a private equity fund is typically constrained by an investment committee, a fund life, leverage discipline, and a defined exit plan, a family office has far more room to manoeuvre. Family offices often buy with a broader strategic lens than financial sponsors. A target may strengthen an existing platform, create regional access, add technical capability, or deepen exposure to a preferred sector.

In GCC family office transactions, the risks associated with focusing on the attractions of a particular deal, having regard to the principals’ reputations, relationships, and long-term ambitions — and the manner in which those attractions can influence deal appetite — means it is important that a family office should never judge an acquisition on strategic fit, headline EBITDA, or the strength of the story alone. The real question is more specific and harder to answer: will this business generate real cash, at an acceptable risk-adjusted return, once it is acquired?

As a result, family office buyers must employ an acquisition process that stops enthusiasm from standing in for evidence.

Valuation starts with quality of earnings

The most important number in most mid-market transactions is not the multiple. It is the businesses’ earnings to which the multiple is applied. For transactions in the MENA region, reported EBITDA can require careful interpretation. Targets may have owner-related costs, related-party arrangements, one-off project revenues, under-invested finance functions or inconsistent accounting policies across jurisdictions.

Revenue recognition can be particularly important in the GCC. Large balances of work in progress (WIP), unbilled revenue, or milestone-linked receivables may be commercially valid, but they need to be tested. A quality of earnings review is therefore not an academic exercise. It answers the buyer’s core commercial question: what is the sustainable earnings power of this business, and how much of it actually turns into cash?

For a family office, that distinction matters. A business can look profitable on an adjusted EBITDA basis and still need real cash support after completion because invoices go out late, customers pay slowly, capex has been deferred, or margins depend on a small number of contracts. The purchase price should reflect those realities before signing so that they do not become a surprise after completion.

Cash conversion is the real test

For family offices looking for long-term accretive assets, cash conversion usually tells you more than accounting profit does. The due diligence questions should be direct:

• How much of EBITDA converts into operating cashflow?
• Which customers or projects drive working capital strain?
• Are receivables current, overdue, or effectively disputed?
• Is unbilled revenue supported by signed contracts, approved milestones, and a realistic invoicing path?
• Is the WIP genuinely billable, or is part of it stale cost that may never convert?
• What cash injection will be required immediately after completion?

These questions are particularly relevant in the GCC, where government, semi-government, and infrastructure-related counterparties can be excellent customers, but may operate with long approval cycles. A buyer should distinguish between slow-but-good receivables and balances that reflect weak documentation, unresolved variations, scope disputes, or aggressive revenue recognition.

This is where financial diligence directly protects valuation. If working capital is structurally higher than the seller suggests, or if cash collection is slower than the headline financials imply, the effective price being paid is higher than the stated enterprise value.

Normalised working capital should not be an afterthought

Working capital is often where value quietly moves between buyer and seller. A target may appear attractively priced, but if it is delivered with insufficient receivables, excess payables, under-provided liabilities, or an inflated WIP balance, the buyer may inherit an immediate funding requirement.

Family office buyers should use a 12-month average as a starting point, but test whether it reflects the real operating needs of the business. The target working capital level should be adjusted for seasonality, growth, customer payment behaviour, project cycles, and historical cash conversion, rather than accepted mechanically.

In our region, the analysis also needs to be country specific. A UAE services business, a Saudi contracting exposure, and a North African government-related receivable may carry very different conversion profiles. Group-level working capital analysis can hide those differences. Country, customer, and project-level schedules are often needed to understand the real risk.

Contracting to protect price

The correct valuation, once identified, then requires careful deal structuring to ensure that financial diligence findings that underpin valuations are translated into practical protections for the buyer. Where uncertainty of earnings and cash conversion remain, these protections take the form of purchase price adjustment mechanics and recourse against the seller. If forecasted earnings upon which the purchase price was predicated are delivered, then the seller will be paid for it. But leave the risk with the buyer, and the price should adjust to match.

The transaction documents should first provide for the most suitable form of price adjustment. With a locked-box structure — requiring, as it does, a set of accounts upon which the price is fixed — debt, cash, working capital, and leakage need to be precisely defined. Loose definitions are where agreed value quietly erodes. The permitted leakage list should be policed so as to ensure that no value escapes the business to the seller between the locked-box date and completion.

With completion accounts, care should be taken to ensure accounting policies employed by the target company do not create artificial outcomes with accounting treatments tailored to the specific of the business. Also important are suitable adjustments to agree normalised working capital and an appropriate definition of debt to include liabilities that might not otherwise be captured.

Where valuation depends on future performance, the same principle applies to earn-out design. An earn-out is only as good as its mechanics: the accounting policies used to measure it, the buyer’s information rights, the covenants governing how the business is run during the earn-out period, and the dispute procedure for when the parties disagree. Mechanics that are measurable, hard to manipulate and aligned with the investment case are what make an earn-out a genuine bridge rather than a deferred argument.

It is also important that risks identified during diligence are properly protected in the transaction documents. That includes reviewing disclosed documents for liabilities that may affect value and structuring warranties so that the buyer is protected against undisclosed risk. If there are concerns around WIP, receivables, key customers, tax, ownership, regulatory approvals, or related-party arrangements, those issues should be reflected in the agreed protections, whether through warranties, indemnities, completion conditions, escrow, or retention arrangements.