In the robust and rapidly transforming business environment of Saudi Arabia, mergers and acquisitions (M&A) continue to accelerate, driven by Vision 2030 diversification goals and increased foreign investment. As of the first half of 2025, MENA region M&A activity reached an impressive US$58.7 billion across 425 deals, with Saudi Arabia and the UAE together attracting US$27.9 billion in deal value indicating strong corporate growth ambitions in sectors from technology to real estate and chemicals.
Within this competitive landscape, commercial due diligence consulting plays a pivotal role in safeguarding corporate transactions. One striking economic truth remains evident: the costs incurred for rigorous due diligence are often ten times lower than the losses associated with failed deals. This article explores why this is the case in the Saudi Arabian context, backed with the latest 2025–2026 data and analytical insights.
What Makes M&A Risky in Saudi Arabia
A merger or acquisition is a strategic leap into growth. Yet, data from global studies and practical market experience show that on average 70 to 90 percent of M&A deals fail to achieve their intended outcomes, whether due to overvaluation, operational integration challenges, or cultural misalignment. While Saudi Arabia’s M&A environment has seen better regulatory clarity and growth, this high global failure rate underscores the inherent risk in any deal.
Failed deals can impose direct financial costs far exceeding initial advisory expenses. These include lost investment premiums, liability exposures, integration setbacks, and brand damage. Global analyses suggest that poor diligence can lead to a value destruction of 15 to 25 percent of the deal’s total value within two years after close. For example, on a hypothetical US$500 million acquisition, that represents a potential loss of US$75 million to US$125 million — far outweighing the cost of thorough due diligence.
Understanding Due Diligence Costs vs Deal Losses
Due diligence costs typically represent a small fraction of total deal expenses. In major transactions, professional fees for financial, legal, and operational review often hover around 1 to 3 percent of deal value in global markets. This translates to a relatively modest investment in comparison with what can be lost in a failed transaction including strategic opportunities lost and avoidable liabilities realized post-close.
In Saudi Arabia, engaging expert commercial due diligence consulting teams provides a multidimensional assessment of target companies from financial health to legal compliance and market fit. These services are tailored to uncover potential risks before contracts are signed. Despite the upfront fees, comprehensive diligence functions as a risk mitigation investment rather than a cost center, often saving companies millions to billions of dollars over time.
In contrast, losses from failed deals are both direct and indirect. Direct losses include termination fees, asset write‑downs, and litigation costs. Broad industry research has documented cases where megadeals collapsed and resulted in hundreds of millions in breakup fees alone. The time executives spend focused on unsuccessful negotiations further diverts company leadership from growth activities, amplifying opportunity costs.
The Value of Early Risk Identification
The reason that due diligence costs remain significantly lower than failed deal losses is rooted in risk identification and mitigation. Proper diligence identifies red flags early in the M&A lifecycle that might otherwise remain hidden until after closing. These risks include:
- Financial discrepancies such as overstated earnings or hidden liabilities.
- Legal and regulatory challenges, especially relevant in Saudi Arabia where evolving Saudization regulations, licensing requirements, and sector‑specific compliance standards can introduce unforeseen obligations.
- Operational inefficiencies, like outdated systems or unsustainable cost structures that erode future profitability.
- Market and competitive risks that impact realistic growth projections.
Through identifying and quantifying these factors early, deal teams can renegotiate terms, adjust valuations, or walk away entirely. Avoiding a bad transaction is invariably cheaper than remediating the consequences of one.
Why Commercial Due Diligence Consulting Is Essential
Professional commercial due diligence consulting combines financial forensics with market analysis and strategic assessment. In Saudi Arabia’s evolving landscape, this means deeper insight into sectors such as technology, industrials, and chemicals, where complex regulatory and economic dynamics are at play.
Insights from industry sources indicate that around 70 percent of successful Saudi deals are preceded by strong due diligence, highlighting its strategic importance. Consulting services add value by offering context‑specific expertise, including local regulatory fluency, which is crucial in cross‑border transactions where foreign investors must navigate unfamiliar business environments.
Moreover, due diligence helps buyers avoid common pitfalls such as cultural integration issues and overestimations of synergy potential major contributors to post‑deal failures globally. Early detection of such issues can mean retaining millions in value that might otherwise erode after closing.
Quantitative Evidence Supporting Diligence Investment
Saudi Arabia’s expanding M&A market offers a real‑world backdrop for these dynamics. In the first half of 2025 alone, the MENA region recorded 425 deals valued at US$58.7 billion, signaling robust dealmaking activity. While precise Saudi‑specific cost breakdowns are not public, the relative scale of value at stake illustrates why prudent diligence is financially rational. A single overlooked risk in a US$500 million transaction could easily cost tens of millions of dollars in losses down the road a figure far above what a comprehensive due diligence process would cost.
With global M&A valuation running into trillions of dollars annually, advisory expenditures represent a small share and a defensible one of total transaction cost, especially when the alternative is a failed deal with irrecoverable loss.
Strategic Outcomes: Better Decisions, Higher Confidence
The strategic advantage of investing in due diligence goes beyond simple cost avoidance. It enables acquirers to make informed, confident decisions, structure post‑deal integration plans more effectively, and anticipate regulatory requirements before they become obstacles. This is particularly vital in Saudi Arabia where Vision 2030 priorities are attracting diverse foreign capital flows.
Professional due diligence consulting also enhances negotiation leverage. Knowledge of potential risk areas allows buyers to negotiate price adjustments, warranties, and indemnity protections that further reduce downside risk. Such contractual safeguards are often more affordable than the money lost when a deal collapses unexpectedly.
In Saudi Arabia’s dynamic M&A landscape, the cost equation is clear: investing in commercial due diligence consulting is far more economical than absorbing the consequences of deal failure. With global research showing that the majority of M&A deals do not deliver expected value without rigorous preparatory analysis, the financial rationale for diligence becomes undeniable.
As regional deal values continue to climb and foreign capital seeks entry into Saudi markets, thorough due diligence remains a strategic imperative that not only protects value but also enables smarter investment decisions. The relatively modest expense associated with professional diligence pales in comparison to the potential value destruction from failed deals, making it a vital component of successful corporate growth strategies in 2025 and 2026.
By prioritizing disciplined analysis, companies can avoid costly missteps, safeguard shareholder value, and confidently pursue opportunities in one of the world’s most exciting economic environments. In essence, when it comes to dealmaking in Saudi Arabia, a dollar spent on due diligence today may save ten tomorrow a truth that every strategic investor should heed.
Finance Advisory 