Corporate M&A in Saudi Arabia: An Introduction

In 2024, the global M&A market showed early signs of recovery after a challenging period marked by economic uncertainty and rising interest rates. According to McKinsey & Company, the total value of global deals over USD25 million rose by 12% (representing an increase of approximately USD364 billion), reaching USD3.4 trillion, while deal volume increased by 8% to 7,784 transactions from 7,207 transactions in the previous year. Similarly, Bain & Company projected total deal value to hit USD3.5 trillion by the end of the year, reflecting a 15% year-on-year increase, approximately USD457 billion higher than 2023 figures – bringing activity back in line with mid-2010s levels.

Meanwhile, M&A activity in the Middle East has remained relatively resilient during global fluctuations and economic headwinds. PwC’s 2024 TransAct Middle East Mid-Year Update reported 214 completed deals in the first half of the year, which was only a 4% decline (representing just nine fewer transactions) compared to the same period in 2023 – significantly outperforming the 25% global drop during the same timeframe and demonstrating the region's comparative stability. More notably, overall deal value in the region surged by 52% to USD29 billion (an increase of approximately USD9.9 billion from the USD19.1 billion recorded in H1 2023), emphasising the Middle East’s growing appeal as a strategic destination for deal making amid ongoing economic diversification initiatives. According to the EY MENA M&A Insights 2024 report, the MENA region recorded a 3% rise in M&A activity, with 701 deals in 2024 compared to 679 deals in 2023. The total deal value in 2024 reached USD92.3 billion, indicating a 7% increase from the previous year. The GCC region accounted for the majority of deals with 580, amounting to USD90 billion.

This robust performance has been driven primarily by sovereign wealth funds and government-backed entities seeking strategic investments across multiple sectors, including energy, infrastructure, technology and financial services.

Within the region, Saudi Arabia continues to stand out as a particularly dynamic market for M&A transactions. Saudi Arabia is seeing steady momentum in M&A activity, driven by Vision 2030, which focuses on economic diversification and expanding the non-oil economy. This transformation is creating opportunities across various sectors, supported by ongoing regulatory reforms and a business environment that encourages businesses growth, profitability and consolidation.

Recent M&A deals driven by ongoing trends

We are seeing more deals, especially in sectors where demand is rising due to Vision 2030 projects and government-led initiatives. A prime example is construction, which is booming due to large-scale infrastructure such as NEOM, Red Sea Project and Qiddiya, and housing initiatives. This, in turn, has driven up demand for essential materials like cement and steel – fuelling M&A activity in those industries and leading to companies positioning themselves to meet anticipated supply requirements over the next decade. The real estate development sector, backed by developers and fund managers, is also pushing strong demand for contractors and essential materials of all sizes and specialties, reinforcing construction as a key area for acquisitions.

This wave of activity is evident across both public and private deals. There were several consolidation moves in 2024, such as the share exchange transaction between Hail Cement Company and Qassim Cement Company, whereby Qassim Cement Company acquired all the issued shares of Hail Cement Company through a share exchange transaction, and the anticipated (though not yet finalised and approved) similar deal between City Cement Company and Umm Al-Qura Cement Company. These cement industry consolidations reflect broader efforts to optimise production capacity, improve operational efficiency and strengthen competitive positioning in a market expecting sustained demand growth annually through 2030. These developments highlight the growing role of M&A in sectors closely tied to the Kingdom’s transformation plans.

Regulatory advancements and reforms

Regulatory advancements have significantly contributed to fostering an active M&A environment and a vibrant commercial market in Saudi Arabia. The new Companies Law that came into force in January 2023 contributed to the growth and expansion of businesses, helping them tackle challenges and stay aligned with the international economic, commercial and legal trends by introducing more flexible corporate structures and governance frameworks.

The new Investment Law, which came into effect in February 2025 and replaced the Foreign Investment Law, has ensured equal treatment between local and foreign investors, and eased foreign investors’ entry into the market by replacing the previous licensing requirement with a registration requirement, to simplify the process and reduce bureaucratic hurdles.

In addition, the Civil Transactions Law, which came into effect in 2023, provided clear governance on contracts and commercial transactions within Saudi Arabia by codifying principles previously governed by Sharia law and judicial precedents. This standardisation has significantly reduced legal ambiguity in business dealings and established more predictable outcomes for contractual disputes. Collectively, these reforms have enhanced legal certainty for businesses, directly and indirectly supporting their growth and increasing confidence in investing in Saudi Arabia across multiple sectors.

Notable trend

One notable trend has been the increase in acquisitions by mid-sized and large companies of smaller businesses that engage in supporting or complementary activities related to the buyer's core operations across multiple industry verticals. Many of these companies are actively seeking to acquire smaller, specialised businesses that are either profitable or show strong potential for future growth. This strategy offers local companies a cost-effective means to expand into new areas to support their core business without building capabilities from scratch, reducing time-to-market by an estimated 40–60% compared to organic development initiatives.

For foreign companies, acquiring an existing business with a successful track record and potential growth in the Saudi market can be more beneficial than establishing a new operation, particularly in sectors requiring local expertise and know-how, such as logistics, specialised distribution networks and government contracting. On the other hand, for sellers, such arrangements present opportunities for new revenue streams and potential expansion, as well as great exit opportunities, which in turn can encourage more entrepreneurship in the region and create a more dynamic start-up ecosystem.

This acquisition strategy has been particularly common in the healthcare sector, where hospital groups and medical service providers are acquiring specialised clinics and diagnostic centres to create comprehensive care networks. The trend reflects a broader shift toward strategic consolidation aimed at creating integrated service offerings while capitalising on operational synergies and economies of scale. Industry analysts predict this pattern will accelerate through 2025 as competition for market share intensifies across priority sectors identified in Vision 2030 implementation plans.

Legal difficulties when acquiring small businesses

While acquiring a small business can mean a relatively shorter transaction timeline due to the business size, it also presents unique challenges, particularly on the legal front, with legal due diligence being a critical area of focus for potential acquirers. Smaller companies often prioritise day-to-day operations and profitability, which may lead to neglect of legal and compliance matters, creating significant risk exposure that may not be immediately apparent. Common issues encountered during legal due diligence include the following.

Weak internal governance

Problems can include a lack of clear records of decisions, the absence of general meetings, failure to file required reports with regulators like the Ministry of Commerce, issues with verification of ownership (especially with unregistered ownership) and inconsistencies between ownership records and actual capital contributions. Many small businesses in Saudi Arabia operate with informal arrangements among shareholders that are not properly documented, creating potential disputes post-acquisition. Corporate record books are often incomplete or non-existent, making it difficult to establish a clear chain of authority for past decisions and transactions.

Licensing and labour law compliance issues

Non-compliance with licensing conditions or labour regulations, such as failing to register employment contracts with Qiwa platform or meeting Saudization requirements, can result in fines or licence revocation, and can create significant operational disruptions. Small businesses frequently operate with outdated licences or permits that do not fully cover their current business activities. Moreover, many struggle to maintain proper documentation for foreign workers, including valid work permits and residency visas. These compliance gaps can create substantial financial liabilities for acquirers, who may become responsible for historical violations.

Unbalanced agreements

To save costs, small businesses often operate without internal or external legal counsel. As a result, they may enter into unbalanced agreements that impose unrealistic commitments, overly restrictive terms or costly requirements, such as obtaining specific insurance coverages. In many cases, small businesses fail to comply with these obligations, leaving themselves exposed to breaches of contract. This can be particularly concerning to the buyer when these agreements are critical to the company’s operations or revenue, as any non-compliance could lead to financial penalties, loss of revenue, legal disputes or the loss of relationships with key clients or partners that may be difficult to restore.

Intellectual property protection gaps

Small businesses frequently under-invest in properly securing their intellectual property assets, creating vulnerability for acquirers. This includes failure to register trade marks, inadequate protection of proprietary technology through patents or trade secrets, and unauthorised use of third-party intellectual property in marketing materials or products. The resulting exposure can significantly impact valuation and create post-closing liabilities that may require substantial investment to remediate.

Due diligence

A comprehensive due diligence report is crucial not only for identifying potential risks and incorporating necessary protections within transaction documents but also in facilitating the buyer’s post-acquisition planning and integration strategy. It serves as a blueprint, outlining essential controls and processes to be implemented, thus ensuring the acquired small business is accurately positioned for success and growth.

The complexity of conducting proper due diligence for small businesses in Saudi Arabia has increased as regulatory frameworks continue to evolve. Industry experts note that cross-functional due diligence teams combining legal, financial and operational expertise typically achieve more comprehensive risk assessments than siloed approaches. This integrated methodology helps to identify interdependent issues that might otherwise remain undetected, such as how operational practices might create regulatory compliance risks or how supplier relationships might affect financial projections.

Furthermore, the timing of due diligence activities can significantly impact transaction success. Early-stage assessment of critical risk factors allows parties to address potential deal-breakers before substantial resources are committed to the transaction. For foreign acquirers entering the Saudi market, cultural due diligence has emerged as an equally important component, helping to navigate differences in business practices, decision-making processes and stakeholder expectations.

The scope of due diligence for small business acquisitions in Saudi Arabia should be tailored to address sector-specific considerations while maintaining thoroughness. Technology-focused acquirers must evaluate intellectual property protection, data privacy compliance and cybersecurity measures, particularly as Saudi Arabia implements more stringent digital regulations. For manufacturing businesses, environmental compliance and facility assessments take precedence, while service-oriented companies require deeper evaluation of human capital, client relationships and service delivery capabilities.

Buyers should also consider implementing a phased due diligence approach for complex transactions. This methodology allows for early identification of material issues that could potentially alter valuation or even transaction viability, before proceeding to more detailed assessments. Such strategic sequencing optimises resource allocation and reduces the risk of overlooking critical factors in the evaluation process.

Conclusion

In 2024, mergers and acquisitions started to recover around the world, and Saudi Arabia stood out as a strong performer. With Vision 2030, government support and new business-friendly laws, the country is becoming a major hub for deal making, especially in sectors like construction, real estate and healthcare.

More mid-sized and large companies are buying smaller businesses to grow faster and reach new markets. While these deals bring big opportunities, they can also come with legal and compliance risks, making careful planning and thorough checks very important.

Looking ahead, M&A will remain a powerful tool for growth in Saudi Arabia, helping companies expand and supporting the country’s long-term economic goals.