In the rapidly evolving ecosystem of corporate deals in Saudi Arabia, one question resonates with investors and dealmakers alike: why do approximately 75 percent of failed mergers and acquisitions fall apart due to weak due diligence practices? The answer lies in the complex nature of the Kingdom’s market, emerging regulatory frameworks, and strategic shifts driven by Vision 2030. Understanding the roots of deal failure requires deep insight into due diligence itself, especially the role of commercial due diligence services in mitigating risk and uncovering hidden threats before they derail transactions.
At its core, due diligence is the process of validating every major assumption of a proposed deal. This includes financial accuracy, legal compliance, operational strength, market potential, cultural fit, and strategic alignment. Yet in a market like Saudi Arabia, where commercial, legal, and operational environments may differ sharply from global norms, superficial due diligence or overreliance on internal data can create blind spots. Even when preliminary reviews appear thorough, gaps in information, unclear regulatory signals, or undiscovered liabilities can manifest later as catastrophic deal breakers. This is where dedicated commercial due diligence services become indispensable, offering third party perspectives and structured analysis that extend far beyond desk reviews.
In fact, industry studies show that more than 70 percent of mergers and acquisitions fail to meet their objectives globally when due diligence is inadequate, and this figure aligns closely with trends emerging in the Saudi market by 2025 and 2026. These failures cause not only financial loss but also strategic setbacks that may harm a company’s competitive position and reputation. According to global research, poor due diligence directly leads to an average destruction of 15 to 25 percent of a deal’s projected value within the first two years of integration, underscoring the need for comprehensive pre-deal scrutiny.
The Saudi Deal Landscape in 2025 and 2026
The corporate transaction environment in Saudi Arabia has been dynamic. In the first half of 2025 alone, Saudi Arabia recorded 59 merger and acquisition transactions, and deal activity continued to grow across sectors such as technology, industrial, and financial services. Broader data from the MENA region also highlights robust deal volumes, with the first quarter of 2025 recording 225 deals valued at US 46 billion, up from previous years, reflecting heightened investor interest across the Middle East where Saudi Arabia plays a central role.
This level of activity brings both opportunity and risk. The expanding number of deals increases the likelihood of encountering complex legal and cultural issues, regulatory requirements, operational obstacles, and valuation disputes. Without careful and structured evaluation before signing, these risks may lead to failed deals, late stage price renegotiations, or post deal integration troubles. A survey by a leading governance institute in 2025 revealed that 97 percent of organizations experienced significant challenges in preparing for major transactions, showing that transaction readiness itself is often insufficient without strengthened due diligence frameworks.
What Weak Due Diligence Looks Like in Practice
Weak due diligence often manifests when key components of a target company’s profile are assumed rather than verified. Common failures include:
Financial Assumptions That Are Not Tested
Surface level reviews of financial statements may overlook revenue concentration, working capital abnormalities, hidden liabilities, or aggressive growth forecasts. When these assumptions do not hold true post acquisition, acquirers frequently discover shortfalls that reduce cash flow or impair operational plans.
Incomplete Regulatory and Compliance Reviews
Saudi Arabia’s legal and regulatory environment includes unique licensing requirements, Saudization employment mandates, and sector specific compliance frameworks. When these are not fully assessed, deals may face unexpected penalties, delays, or even reversal after closing.
Overlooking Cultural and Operational Fit
Organizations that neglect operational realities such as supply chain strengths, technology systems, leadership alignment, or market dynamics often face integration problems that erode value. Post deal failures in synergy capture often trace back to overlooked operational clues in diligence.
Market Misjudgment and Competitive Threats
Understanding the addressable market, competitive landscape, pricing pressures, and macroeconomic thrusts (including Vision 2030 objectives) is critical. Failure to assess these properly can lead to overvaluation, strategic misalignment, or investment in declining segments.
Quantifying the Impact of Due Diligence Failures
When due diligence is weak, the consequences are measurable and stark. According to research referenced in 2025, deals with insufficient due diligence can destroy significant portions of expected value, making them less likely to achieve integration success or strategic goals. A study of thousands of transactions globally also reports that 70 to 75 percent of transactions underperform or fail to deliver projected benefits when pre deal evaluation is inadequate.
In contrast, robust due diligence correlates with higher likelihood of deal success, smoother integration, and stronger value creation. Analysis from advisory markets indicates that engaging professional diligence support can protect up to 35 percent more value in transactions by uncovering risks early, refining valuation models, and enabling conditional protections in contract terms.
In the Saudi context, deals backed by strong due diligence are typically more resilient. They navigate regulatory complexity more smoothly, incorporate deeper market intelligence, and align better with strategic realities such as Vision 2030 targets and sector growth projections. This alignment helps buyers avoid costly surprises and steer transactions toward measurable outcomes.
How Effective Commercial Due Diligence Services Prevent Failure
The role of commercial due diligence services is far more than checklist compliance. Top tier commercial assessment engages cross functional teams to evaluate market dynamics, validate growth forecasts, scrutinize customer and competitor metrics, and stress test strategic assumptions. These services leverage industry expertise, local knowledge, and advanced analytic tools to surface risks that often remain hidden in internal reviews.
Key elements of commercial due diligence include:
- Market and Competitive Analysis: Understanding future growth potential, segment maturity, market share dynamics, and competitive threats ensures the buyer does not overestimate the target’s prospects.
- Revenue and Customer Validation: Verifying customer contracts, revenue quality, churn patterns, and concentration risks identifies potential volatility that could affect future performance.
- Operational Risk Assessment: In depth look at supply chain resilience, technology infrastructure, and operational bottlenecks helps buyers plan integration and scale effectively.
- Regulatory and Legal Scrutiny: Local counsel and compliance specialists validate licensing, regulatory conditions, labor requirements, tax exposure, and other legal frameworks specific to Saudi Arabia.
Investors who prioritize these insights outside of internal teams have a far higher chance of navigating complex deals with confidence, turning potential uncertainties into quantifiable decision points.
Emerging Trends in Due Diligence for 2026
Looking forward to 2026, the due diligence landscape itself is evolving. Adoption of advanced analytics such as artificial intelligence, cloud based data rooms, and predictive modelling is helping deal teams process vast amounts of information more quickly and accurately. This trend is especially relevant in Saudi Arabia where growing sectors such as digital technology, renewable energy, and advanced manufacturing require specialized scrutiny.
Dealmakers are also placing greater emphasis on ESG risk factors, cybersecurity resilience, and post integration performance plans. These broader due diligence dimensions reflect the reality that transactions no longer hinge solely on historical financials, but also on future readiness and strategic fit.
In conclusion, the high percentage of failed Saudi deals traced back to weak due diligence underscores a critical lesson for investors and corporate strategists: transactions are only as strong as the foundation upon which they are built. In markets as dynamic and nuanced as Saudi Arabia, shallow or incomplete review processes leave acquirers exposed to financial losses, strategic missteps, and integration setbacks. Leveraging expert commercial due diligence services enhances visibility into potential pitfalls, clarifies value drivers, and supports informed decision making.
For organizations preparing to transact in the Kingdom, prioritizing comprehensive due diligence is no longer optional. It is a strategic imperative that can spell the difference between costly failure and sustainable success. As deal activity continues into 2026 and beyond, the value of deep, structured, and objective insight will remain central to achieving enduring outcomes through well executed transactions. commercial due diligence services provide the insight that transforms deal risk into opportunity and underpins successful corporate growth.
Finance Advisory 