Corporate M&A in Saudi Arabia: An Introduction

Global M&A experienced a strong rebound in 2025, with total deal value rising approximately 40% year-on-year to an estimated USD4.9 trillion, marking the second-highest level on record according to the Bain & Company Global M&A Report 2026. The recovery was driven largely by megadeals and strategic portfolio repositioning amid rapid technological disruption. Building on this global momentum, the Middle East recorded even stronger deal expansion. The PwC TransAct Middle East 2026 report notes that regional deal volumes increased by 33% year on year, reaching approximately 635 completed transactions, supported by domestic and intra-regional consolidation, renewed inbound investment and the continued influence of sovereign capital.

This robust performance continued to be 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 one of the most dynamic markets for M&A transactions. The Kingdom is experiencing sustained momentum in deal activity, driven by Vision 2030 and its strategic focus on economic diversification and the expansion of the non-oil economy. This structural transformation is generating significant opportunities across a broad range of sectors, underpinned by ongoing regulatory reforms and a progressively investor-friendly business environment that promotes growth, profitability and strategic consolidation.

In parallel, Saudi Arabia is placing strong emphasis on artificial intelligence and advanced technologies, exemplified by the establishment of HUMAIN by the Public Investment Fund and its subsequent acquisition of ai.io, reinforcing the Kingdom’s ambitions to position itself as a regional hub for innovation and digital transformation.

Recent M&A deals driven by ongoing trends

A growing number of companies are actively expanding through acquisitions, with several listed companies executing strategic transactions in 2025. Notably, Dallah Healthcare Company completed the acquisition of the remaining shares in Care Shield Holding Company (Kingdom Hospital and Consulting Clinics) for approximately SAR434.3 million. In addition, Dallah signed a share purchase and subscription agreement with Ayyan Investment Company to acquire its stakes in Al Ahsa Medical Services Company and Al Salam Medical Services Company through a capital increase, issuing new shares to Ayyan. These transactions reflect a clear strategy of geographic expansion and patient base growth. Healthcare sector consolidation has continued more broadly, including the acquisition by Al Hammadi Holding of Wareed Health Medical Company, and further evidencing the sustained role of M&A in strengthening operational scale and enhancing service offerings within the Kingdom’s evolving healthcare landscape.

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 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 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.

Along with the announced proposed new regulations and amendments to other regulatory frameworks, such as the Companies Rules in Special Economic Zones and the amendments to the Offering of Securities and Continuing Obligations rules, which allows subsidiaries owned 100% by a listed company to be listed through a direct registration rather than an offering, the firm anticipates increased future activity in mergers and acquisitions, driven by the diversity of available legal structures and exit mechanisms.

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 towards 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 2026 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 Saudisation 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

Saudi Arabia’s M&A market continues to evolve at pace, driven by Vision 2030 and a rapidly modernising legal and regulatory landscape. The successive introduction of the Companies Law, the Investment Law and the Civil Transactions Law has collectively enhanced legal certainty, reduced transactional ambiguity, and created a more predictable environment for both domestic and foreign investors. The anticipated regulatory developments, including the Companies Rules in Special Economic Zones and the proposed amendments to the Offering of Securities and Continuing Obligations rules, are expected to further diversify available transaction structures and exit mechanisms.

As deal activity grows in volume and complexity within this evolving legal environment, thorough legal due diligence remains the cornerstone of any successful transaction. The ability to identify, assess and address legal risk early in the process will be a key determinant of transaction outcomes.