When corridors get stressed, re-underwrite working capital, logistics, and force majeure language — not a geopolitics memo.
I write this from Muscat, Oman, for investors and operators running PE or structured deals into GCC SMEs. Regional conflict shows up in diligence as stale DSO, freight that no longer matches the model, and contract clauses that were never stress-tested. It does not show up as a useful country-risk slide.
This is the third and last time in this series I treat corridor stress as a deal problem. The earlier posts covered the cash-cycle sequence and the freight–inventory–receivables pack. Here the focus is diligence and documentation when routes and payment behaviour stop looking like last year’s file.
Working capital assumptions go stale first
Most CIMs and quality-of-earnings packs in this region still lean on trailing DSO, stock days, and payable days. Those numbers can look calm while the corridor is already rewriting them.
Ask for a bridge, not a comfort letter. What happened to collections on the top ten customers in the last ninety days. Which suppliers shortened terms or asked for prepay. How much inventory sits in transit versus on the shelf. Which SKUs were bought early “just in case” and still lack a named sell-through date.
If the model uses last year’s cash conversion while freight and aging have moved, the purchase price embeds a working-capital trap. Say that in the room. Haircut the normalise WC, or put a true-up and a tighter locked-box / completion-accounts mechanic around it. Soft language about “temporary corridor noise” is how sponsors overpay and then discover the line is already tight in month one.
For Oman and UAE trading and light manufacturing targets, I also want goods-in-transit visibility and demurrage or storage exposure named. Cash trapped on the water is still cash the buyer will fund after close.
Logistics is a diligence workstream, not a footnote
Corridor disruption is a logistics underwrite. Map the actual lanes the company uses: origin, mode, typical transit, alternate routes, and who pays when windows slip. Ask which customers will wait and which will cancel or claim when deliveries stretch.
A target that has one critical inbound lane and no alternate supplier is a concentration risk. A target that already dual-sources and has written stock caps is a different story. Diligence should separate those two companies even if their EBITDA looks similar.
I want freight variance versus plan for recent months, not an annual average that hides a bad quarter. I want open PO aging and arrival slips. I want to know whether the sales team is still promising lead times the warehouse cannot hit. Operators who leave logistics “with the freight guy” without a cash owner usually discover the bleed after exclusivity.
Force majeure and deal language under stress
Standard SPA and supply contracts often treat force majeure as a distant boilerplate paragraph. When regional corridors snarl, that paragraph gets tested.
Read it. Does it cover shipping delays and route closures, or only a narrow list of events. Who notifies whom, and by when. Does it suspend payment obligations, delivery obligations, or both. Can a key customer walk, or must they take delayed product. Can a supplier stop shipping and keep your deposit.
On the deal side, mirror that clarity. Representations on material contracts should flag customers or suppliers already invoking delay or term changes. MAC / MAE language should be negotiated with eyes open: corridor stress that hits the whole sector is different from a company-specific collapse, and both sides will argue which is which. Earn-outs tied to sales that depend on unreliable lanes need explicit adjustment mechanics, or they become a second negotiation after close.
I am not asking counsel to draft geopolitics. I am asking operators and investors to treat logistics interruption and payment stretch as foreseeable commercial facts in this region, and to put owners, notice periods, and cash consequences in writing before signing.
What I put in the diligence pack
Keep the pack operational:
- Trailing WC metrics plus a ninety-day stress bridge (collections drift, term changes, GIT, safety stock).
- Lane map: primary routes, alternates, concentration, recent transit slips.
- Top customers and suppliers: payment behaviour under stress, any prepay or CAD shift, dispute spike.
- Contract extract: force majeure, delivery windows, termination for delay, deposit treatment.
- Facility headroom and bank appetite if freight and stock days rise further.
- Price / WC / earn-out implications in one page — not buried in an appendix.
Share that with IC and with the management team the same week. Surprises after signing destroy trust faster than a stressed corridor does.
What not to do
Do not replace diligence with a long regional briefing. Operators need cash and contract facts. Do not assume “Oman is stable so the model is fine” — many Muscat-based traders still buy, ship, and collect across corridors that re-price when routes snarl. Do not invent precision: if transit windows are uncertain, show ranges and decision triggers, not fake point estimates.
I work PE and M&A diligence from Muscat, Oman, with sponsors and family sellers who want a close that survives the first corridor shock after signing. When regional conflict rewrites risk, start with working capital, logistics, and the clauses that govern delay. The geopolitics track can wait. The cash and the SPA cannot.