Saudi Arabia’s rapidly evolving investment landscape continues to draw global capital in unprecedented numbers, but beneath the surface of headline-grabbing deals lie hidden risks that can undermine even the most promising opportunities. As mergers and acquisitions activity escalates across the Kingdom, the role of commercial due diligence consulting has never been more important. In a market where deal value and complexity are surging, investors need deep insight into financial, regulatory, operational, and strategic risks before committing capital. According to industry reports, Saudi Arabia recorded nearly sixty M&A transactions in the first half of 2025, contributing meaningfully to a broader regional upswing that saw MENA deal values reach almost US$59 billion in the same period and cross-border transactions driving robust activity.
This explosive pace of dealmaking brings with it unique challenges. Investors who fail to fully understand a target company’s true operational health, legal standing, or market position risk exposure to costly liabilities post-closing. With foreign direct investment continuing to flow into the Kingdom’s strategic sectors such as technology, industrials, and financial services, companies must deploy commercial due diligence consulting early in the deal cycle to uncover risks that traditional financial or legal reviews might overlook. A disciplined due diligence process not only identifies potential deal killers but also strengthens negotiation positions and helps map mitigation strategies. In this article, we explore the hidden risks in Saudi deals that due diligence can reveal, supported by the latest figures and quantitative data from 2025.
The Rising Tide of M&A Activity in Saudi Arabia
Recent data shows that Saudi Arabia remains at the heart of M&A momentum in the Middle East. In the first half of 2025, the Kingdom accounted for an estimated fifty-nine transactions, demonstrating resilience in dealmaking even as global activity experienced pressure in other regions. This strong performance forms part of a broader regional trend, with the Middle East and North Africa recording approximately 425 deals valued at around US$58.7 billion during the first six months of 2025.
Despite this positive headline performance, the sheer volume and diversity of deals mask underlying risk profiles that vary dramatically by sector and deal structure. For instance, technology and industrial sectors accounted for a significant share of activity, but these industries often involve intangible assets, intellectual property, and rapidly evolving regulatory frameworks that complicate valuation and risk assessment. Investors must recognize that aggregated deal value, while impressive, can create a false sense of security without a granular understanding of individual transaction risk.
Hidden Financial and Operational Liabilities
Financial due diligence traditionally focuses on verifying historical financial performance, revenue quality, and the sustainability of cash flows. However, in Saudi deals, hidden liabilities often lurk beneath seemingly strong financial statements. These can include off-balance sheet obligations, unreported contingent liabilities, and unverified revenue sources tied to government contracts or intercompany arrangements. Unless financial diligence is complemented by a holistic commercial due diligence consulting approach that examines market positioning, competitive dynamics, and operational resilience, investors may overlook critical risk factors.
For example, a target company might show strong revenue growth, but an in-depth review could reveal that a substantial portion of that growth depends on a small number of large contracts that are subject to renewal or regulatory approval. Without identifying such concentrations, buyers may face sudden revenue loss shortly after closing.
Operational risks also extend to supply chain dependencies, workforce composition, and compliance with Saudization regulations. Saudi Arabia’s labor market policies, which emphasize local employment, can affect payroll costs and operational scalability if not properly understood prior to acquisition.
Legal and Regulatory Uncertainties
Saudi Arabia’s legal system and regulatory environment are undergoing continuous change as part of the Vision 2030 economic transformation. While regulatory reforms have bolstered investor confidence, they also introduce complexity. Differences in corporate governance standards, foreign ownership restrictions, and sector-specific licensing requirements can create unexpected compliance challenges that surface only during detailed due diligence.
Additionally, new corporate rules introduced in 2025 mandate the identification of beneficial owners holding a quarter or more of a company’s equity, closing gaps in transparency that previously allowed opaque ownership structures to persist. While these reforms benefit investors in the long run, they also require buyers to revisit assumptions about control and influence during acquisition assessments.
Without rigorous due diligence that integrates legal, financial, and operational lenses, investors may find themselves exposed to litigation, fines, or corrective actions post-closing. A comprehensive review of material contracts, intellectual property rights, regulatory filings, and litigation history is indispensable to avoid such pitfalls.
Market and Valuation Risks
Accurate valuation is essential to determine fair deal pricing and avoid overpayment. However, Saudi Arabia’s dynamic market conditions can complicate valuation models, particularly for fast-growing sectors like technology and digital services. A deal that looks attractive based on revenue multiples or market comparisons can quickly become overvalued if underlying growth drivers are misjudged or if future profitability assumptions prove overly optimistic.
Commercial due diligence consulting helps by calibrating valuation assumptions against market realities. Expert consultants assess competitive landscapes, pricing dynamics, customer retention metrics, and macroeconomic trends that influence future performance. For instance, while Saudi Arabia’s non-oil GDP growth is projected at around 3.4 percent in 2025, inflation remains contained at approximately 2.3 percent, creating a stable macro backdrop. However, sector-specific headwinds such as technology adoption costs or supply chain disruptions may alter growth forecasts materially.
Geopolitical and Strategic Risks
Saudi Arabia’s role in global energy markets and regional geopolitics adds another layer of risk for cross-border deals. Geopolitical tensions can influence currency stability, trade policies, and investor sentiment. Commercial due diligence should encompass geopolitical risk analysis, including potential shifts in regulatory priorities or international trade agreements.
Furthermore, government-related entities and sovereign wealth funds are prominent deal participants, which can affect deal dynamics and strategic outcomes. In the first half of 2025, government-related entities contributed substantially to overall deal value, underscoring the influence of state actors in shaping deal flows. Understanding the role and objectives of these players is crucial to aligning investment expectations and negotiating transaction terms effectively.
ESG and Emerging Risk Factors
Environmental, social, and governance considerations increasingly influence deal outcomes. A global study indicates that nearly half of surveyed investors encountered significant deal implications due to material ESG findings during due diligence, sometimes even halting transactions altogether. As Saudi Arabia expands its renewable energy, tourism, and cultural sectors under Vision 2030, ESG risks related to environmental compliance, labor rights, and governance standards merit close attention.
Commercial due diligence consulting firms are integrating ESG assessments into broader diligence frameworks to ensure that potential risks are both identified and quantified in financial terms. This enhances transparency and enables investors to negotiate appropriate warranties, indemnities, or pricing adjustments to account for ESG exposure.
Saudi Arabia’s investment environment in 2025 offers unprecedented opportunities marked by vigorous M&A activity, robust deal volumes, and a strategic shift toward diversification. Yet beneath this growth are hidden risks that can erode value if not meticulously uncovered ahead of closing. Investors must adopt a comprehensive diligence approach that goes beyond traditional financial and legal reviews to include commercial due diligence consulting at every stage of the transaction.
By partnering with experienced consultants, investors can identify financial, operational, regulatory, and market risks early, strengthen negotiation positions, and secure resilient outcomes in an increasingly competitive landscape. As Saudi Arabia continues its economic transformation under Vision 2030, the integration of disciplined due diligence practices will remain a defining factor in whether deals succeed or stumble. Incorporating a robust commercial due diligence consulting strategy is not just prudent; it is essential for navigating the complexities of the Kingdom’s evolving investment ecosystem.
Finance Advisory 