PPA is the process required by IFRS 3 of allocating the price paid in an acquisition to the identifiable assets and liabilities of the acquired business at fair value, including intangible assets such as customer relationships, brand, technology, and order backlog that may not have appeared on the acquiree's pre-acquisition balance sheet. Any remaining amount is recognised as goodwill. Must be completed within 12 months of the acquisition date.
Every acquisition completed under IFRS requires a purchase price allocation. Getting it right determines how your acquisition looks in your financial statements for the next decade. Corvian Advisory delivers IFRS 3-compliant PPAs that your auditors accept and your management can explain.
Under IFRS 3, all identifiable intangible assets must be separately recognised at fair value, even if they were not on the acquiree's balance sheet. These are the most commonly identified classes in UAE M&A transactions.
The value of the acquired customer base, including existing contracts and expected renewals. Typically the largest intangible in a service or B2B business. Valued using the Multi-Period Excess Earnings Method, isolating earnings attributable after charges for all other contributing assets.
The value of an established brand that drives customer preference and pricing power. Valued using the royalty the business would otherwise pay a third party to use the brand, discounted to present value. Rates benchmarked from licensing transaction databases.
Proprietary software, algorithms, platform code, or product technology. Valued using Relief from Royalty or the Cost Approach (reproduction/replacement cost less obsolescence). Often the primary value driver for SaaS and technology businesses.
The value of signed contracts and purchase orders at the acquisition date not yet fulfilled. Valued using net cash flows expected from completing the backlog, discounted at an appropriate rate. Typically a short-lived intangible of 6–24 months.
Agreements signed by selling shareholders not to compete with the acquired business. Valued by comparing business value with the non-compete in place versus without it, the difference represents the protection's economic value.
UAE regulatory licences, financial services (FSRA, DFSA), healthcare, education, have value where scarce or non-replicable. Valued using income, cost, or market approaches depending on the licence type.
A purchase price allocation is a technically demanding exercise, requiring calibration of the Weighted Average Return on Assets (WARA) against the transaction's discount rate (WACC) to ensure internal consistency. We work closely with management and your audit team throughout.
"A well-executed PPA minimises unexplained goodwill and produces financial statements that tell a coherent post-acquisition story."
Review SPA, financial model, data room, management accounts, and audited financials of the acquiree. Understand deal rationale and synergy assumptions.
Identify all intangible assets meeting IFRS 3/IAS 38 recognition criteria, separability or contractual-legal basis, whether or not on the pre-acquisition balance sheet.
Interview management on each identified intangible, customer relationships, brand strength, technology. Gather inputs for projections and assumption documentation.
Apply appropriate method to each intangible class. Build MPEEM, Relief from Royalty and other models. Calculate Contributory Asset Charges. Cross-check WARA vs. WACC.
Issue IFRS 3 PPA report with full working papers. Provide amortisation schedules per intangible class. Respond to auditor queries and financial statement disclosures.
| Intangible Asset | Primary Valuation Method | Key Inputs | Useful Life |
|---|---|---|---|
| Customer Relationships | Multi-Period Excess Earnings (MPEEM) | Revenue retention, attrition rate, margin, CAC, discount rate | 5–15 years |
| Brand / Trade Name | Relief from Royalty | Revenue base, royalty rate, discount rate, tax rate | Indefinite or 10–20 years |
| Developed Technology | Relief from Royalty / Reproduction Cost | Revenue attributable, royalty rate, development cost, obsolescence | 3–10 years |
| In-Process R&D | Income Approach (completion probability) | Revenue, cost to complete, completion probability, discount rate | 3–7 years post-completion |
| Order Backlog | Incremental Cash Flow | Backlog revenue, margin, expected completion period, discount rate | 6–24 months |
| Non-Compete Agreement | With-and-Without Method | Revenue at risk, competitive threat probability, discount rate | Contractual life |
| Favourable Leases | Incremental Cash Flow | Market rent vs. contract rent, remaining lease term, discount rate | Remaining lease term |
| Licences / Approvals | Income / Cost / Market | Licence scarcity, cost to replicate, income attributable | Contractual life or indefinite |
Fixed fee, agreed before work begins. No hourly billing. Scope is determined by the number of identified intangibles, transaction complexity, and data availability.
Single-entity acquisition with 2–4 identifiable intangible classes. Clear financial data. Completed within 4–6 weeks.
Multi-entity acquisitions, 5+ intangible classes, in-process R&D, or acquisitions requiring financial reconstruction.
New to PPA? Read our Purchase Price Allocation UAE guide for a plain-language walkthrough of the process.