Modelled EBITDA gets airtime; working capital quality, related parties, concentration, and decision rights often get a polite skim.
From Muscat, Oman, I see the same gap on both sides of the table. Buyers and lenders chase the earnings bridge. Operators who live inside the company already know where cash sticks, who really decides, and which customers carry the month. Those questions are not exotic. They are just easy to skip when the timeline is tight and the CIM looks clean.
Skipping them does not make the risk disappear. It moves the surprise into the first hundred days — or into a WC true-up nobody budgeted for.
Working capital that the model never tested
Ask how cash actually converts, not only what last year’s DSO and stock days printed. Who owns disputes. How many invoices sit blocked on incomplete delivery notes. Whether slow movers still get reordered because the buyer fears a stockout more than a full aisle of dead SKUs.
Ask for a cash bridge that reconciles to the bank, not a WC schedule that only exists for the data room. Ask what happens to collections when the top three customers stretch ten days past terms. Ask which suppliers will shorten credit the week you miss a payment.
Operators should run this before any process starts. If you cannot answer it for your own shop, outside capital will price the fog. PE and strategics looking at GCC SMEs from a Muscat or regional seat will find the fog eventually. Better you find it first.
Related parties that sit in the margins of the pack
Related-party sales, purchases, rent, management fees, and owner bridges often show as soft footnotes. Diligence that stops at “yes, disclosed” is incomplete.
Ask for amounts, terms, and whether those flows would survive if the family or founder stepped back. Ask which customers or suppliers are related and whether prices are benchmarked. Ask how owner draws and informal bridges are recorded — as financing with repayment dates, or as calm camouflage in operating cash.
I do not treat related parties as automatic deal-breakers. I treat opacity as one. A clean sketch with dates and commercial logic is underwritable. A fog of “family arrangements” is a discount waiting for a lawyer.
Operators: put the sketch on one page before the teaser. Investors: refuse to leave related parties to the last week of exclusivity.
Customer concentration without a plan B
Concentration slides get glanced at. The hard questions do not.
What share of revenue and receivables sits with the top five. What happens to cash if the largest account stretches, disputes, or walks. Whether credit limits match reality or sit as polite ERP defaults. Whether the sales story for “diversification” has named pipeline or only aspiration.
In trading and manufacturing SMEs across Oman and the wider GCC, concentration is common. Pretending it is not is useless. Underwriting it means knowing the relationship owners, the contract status, the payment history under stress, and the working-capital hit if that account slows.
If the model assumes smooth collections from a dominant customer, ask for evidence from a month when that customer paid late. If there is no such month in the file, assume one is coming.
Decision rights that still live in one head
Cap tables and org charts look tidy. Decision rights often do not.
Who can extend credit. Who can override a stock cap. Who signs supplier terms. Who talks to the bank. Who can commit to a related-party deal. If every exception routes to the founder at midnight, you do not have a partner-ready operating company. You have a founder with a team of messengers.
Ask for a one-pager: reserved matters, signing authorities, and escalation paths. Ask how decisions were made in the last cash squeeze. Ask whether the second line can run collections and stock discipline for two weeks without the owner in every thread.
For PE-backed holds and family businesses considering outside capital, this is not governance theatre. Soft decision rights show up as delayed closes, surprise POs, and credit given that nobody underwrote.
A short list I keep on the table
When I am inside diligence or pre-diligence cleanup in Muscat, Oman, I press these until the answers are boring:
- Cash bridge to bank; aging with dispute owners; stock ABC with freeze list.
- Related-party map with amounts, terms, and what survives a step-back.
- Top-customer concentration, payment behaviour under stress, credit limits vs reality.
- Decision-rights one-pager: credit, stock, suppliers, bank, reserved matters.
- What broke in the last tight cash month — and who fixed it.
Investors skip these when they fall in love with the sector story. Operators skip them when they are tired of their own mess. Neither excuse survives contact with a real true-up.
I work PE, M&A, and turnaround work from Muscat, Oman, with GCC SMEs that want a clean underwrite and sponsors who want fewer surprises after signing. Ask the diligence questions that look dull on the checklist. They are the ones that decide price, terms, and whether week one feels like a partnership or a cleanup.