In the fast‑evolving investment landscape of Saudi Arabia, mergers and acquisitions (M&A) are reshaping industries and fueling strategic growth. Driven by Vision 2030 economic reforms and sweeping diversification initiatives, deal activity has surged across technology, energy, infrastructure, and financial services. According to the latest EY MENA M&A Insights report, the Middle East recorded eight hundred eighty four deals in 2025 valued at more than one hundred six billion US dollars, marking a twenty six percent increase in volume and a fifteen percent increase in value compared to 2024.
However, beneath this vigorous activity lies a troubling pattern: a significant portion of transactions fail to deliver strategic value or collapse entirely after signing. Across global markets, studies consistently estimate that between sixty and eighty percent of M&A deals fail to achieve their stated objectives, and Saudi Arabia’s experience is no exception. While the high volume of transactions reflects confidence and capital flow, it also highlights a fundamental problem that undermines deal success: weak or inadequate due diligence.
In this context, understanding why sixty five percent of failed Saudi deals point to weak due diligence processes is critical to transforming the Kingdom’s dealmaking ecosystem from one of risk to one of predictable value creation. Central to this transformation is commercial due diligence services, a specialized approach that bridges the gap between opportunity and failure by uncovering critical information early in the transaction lifecycle.
The Strategic Importance of Due Diligence in Saudi Deals
Due diligence is the systematic investigation of a target company’s financial data, legal standing, operational structures, market position, regulatory compliance, and strategic fit. When performed thoroughly, it provides a clear picture of risks and opportunities, grounding investment decisions in facts rather than assumptions. Yet, in many failed deals, businesses treat due diligence as a procedural step rather than a strategic instrument.
According to reports from consulting firms, the absence of deep and targeted due diligence directly contributes to an average value destruction of fifteen to twenty five percent of the deal’s value within the first two years after closing when red flags are missed at the outset. This means that on a deal valued at five hundred million US dollars, buyers could incur value loss between seventy five and one hundred twenty five million US dollars post‑acquisition because risks were not properly identified before signing.
The quantitative impact of failed due diligence extends beyond value erosion. In the broader Gulf Cooperation Council (GCC) region, analyses show that approximately forty five percent of deals underperform relative to their pre‑acquisition financial projections, and a significant percentage of post‑closing problems stem from due diligence gaps. These numbers reveal that superficial investigations where teams rely on incomplete data rooms, cursory financial reviews, or limited strategic assessments are no longer adequate in the complex environment of cross‑border and high‑growth transactions.
What Causes Due Diligence Failures in Saudi Deals
To understand why due diligence failures are so prevalent in Saudi deals, it is essential to analyze where traditional processes fall short. Some of the most common weaknesses include:
1. Incomplete Commercial and Market Assessment
Many due diligence exercises concentrate primarily on financial statements and legal compliance, leaving strategic market analysis underdeveloped. Without a rigorous examination of market dynamics, competitive pressures, and customer behavior, buyers risk overestimating growth forecasts or underestimating threats. A detailed commercial due diligence engagement would probe deeply into addressable markets, growth rates, pricing sensitivity, and competitive barriers data essential for accurate valuation and long‑term success.
2. Limited Operational Understanding
Operational diligence uncovers hidden liabilities, evaluates supply chain resilience, and assesses production efficiency. In Saudi deals where infrastructure transitions and digital transformation are common, overlooking operational risk can lead to disruptions after closing, jeopardizing revenue continuity and integration readiness.
3. Cultural and Human Capital Misalignment
Cultural integration is frequently cited as a leading cause of deal underperformance. A sizable acquisition can alter leadership dynamics, disrupt employee engagement, and create unintended conflicts. According to industry insights, organizational culture clashes contribute significantly to value loss when human capital risks are not evaluated early in the diligence process.
4. Regulatory and Compliance Complexities
Saudi Arabia’s regulatory environment, influenced by Vision 2030 policy reforms and sector‑specific licensing regimes, requires nuanced assessment. Weak due diligence often fails to map out regulatory contingencies that could disrupt licensing, Saudization compliance, taxation, or cross‑border constraints. Such oversights can lead to legal penalties and delay value capture.
The Role of Commercial Due Diligence Services in Deal Success
At the heart of successful due diligence lies commercial due diligence services, a specialized field that extends beyond conventional financial and legal checks to include deep strategic analysis. These services bring expertise in market dynamics, competitive benchmarking, customer segmentation, and revenue model validation.
Commercial due diligence identifies whether the target’s growth projections are realistic given market conditions and competitive pressures. By validating assumptions about customer retention rates, revenue diversification, and future demand, it provides a foundation for accurate valuations and sound investment theses.
In Saudi Arabia, where economic diversification and digital transformation are accelerating, commercial due diligence services help investors:
- Identify growth drivers and market limitations for the target business,
- Quantify competitive threats and pricing risks,
- Evaluate scalability of products or services within domestic and global markets,
- Benchmark the target against key industry performance standards.
Without these insights, buyers are left to build strategies on incomplete information, increasing the likelihood of misvaluation and misalignment between expectations and reality.
Quantitative Evidence of Due Diligence Impact
The statistical evidence supporting the importance of due diligence is compelling. Global research indicates that disciplined due diligence can reduce transaction risk by up to forty percent, a powerful reduction reflecting fewer surprises, lower integration hurdles, and more accurate pricing.
Furthermore, the continued growth of M&A in the Middle East underscores the urgency for robust due diligence frameworks. In the first half of 2025, the MENA region recorded four hundred twenty five deals valued at nearly sixty billion US dollars, demonstrating strong demand for cross‑border investment opportunities. Saudi Arabia was integral to this momentum, recording over fifty nine transactions in the first half of the year alone, across industrial, technology, and financial services sectors.
Despite this robust environment, the prevalence of failed deals serves as a reminder that deal quantity must be matched with diligence quality. High transaction volume without strategic evaluation increases exposure to undiscovered risk, unverified forecasts, and operational fragilities.
Commercial Due Diligence and Integration Success
Deal success does not end at closing; it is measured by whether the transaction delivers tangible returns, synergies, and strategic value over time. Post‑closing integration is notoriously sensitive to the quality of diligence performed beforehand. Without a deep understanding of cultural, operational, and commercial risk factors uncovered during due diligence, integration plans are often reactive rather than proactive, leading to delays and derailed synergies.
This is where high‑impact commercial due diligence services add lasting value. They bridge pre‑closing assessments and post‑closing execution by:
- Mapping strategic value drivers that inform integration playbooks,
- Highlighting operational dependencies critical to day‑one execution,
- Identifying cultural integration needs that affect leadership alignment and workforce stability.
By linking diligence insights to integration planning, investors and acquirers can convert risks into actionable strategies, thus reducing value leakage and enhancing the probability of sustained success.
Lessons for Saudi Deal Makers
Saudi deal makers who wish to improve the success rate of transactions must embrace a culture of disciplined due diligence. This means:
Adopting multidisciplinary diligence teams: Commercial, financial, regulatory, and operational experts should collaborate from the earliest stages of a deal to create a unified risk profile.
Integrating scenario analysis: Sensitivity testing and market simulations help illuminate outcomes under shifting economic and competitive conditions.
Engaging third‑party specialists: Independent commercial due diligence services provide objective validation of assumptions and guard against internal biases that can inflate valuations or dilute risk assessment.
Extending diligence beyond numbers: Factors such as brand reputation, leadership cohesion, and industry disruption trends are increasingly material to deal outcomes and must be evaluated with equal rigor.
By embedding these practices into deal processes, the Kingdom’s companies and investors can tilt the odds in favor of success rather than failure.
The Path to Higher Success Rates
The success of Saudi deals today depends not just on capital flow or strategic intent but on the precision of pre‑transaction analysis. The fact that around sixty five percent of failed Saudi deals point to weak due diligence processes is a call to action for investors, advisors, and corporate leaders to re‑engineer how deals are evaluated and executed. Robust commercial due diligence services play a central role in this transformation, acting as both a shield against unseen risks and a compass toward value capture.
In a market where deal value is expanding evidenced by strong regional growth figures and escalating investor participation establishing disciplined due diligence practices is no longer optional. It is fundamental to ensuring that Saudi Arabia’s M&A landscape evolves from high activity to high success. Elevating diligence quality, especially through commercial due diligence services that uncover deep strategic insights, will help reduce failure rates, protect investor capital, and unlock the full potential of the Kingdom’s ambitious economic vision.
Finance Advisory 