Despite global headwinds, deal volume trends in the Middle East for the first half of 2024 have revealed a more optimistic outlook, as seen in our 2024 TransAct Middle East – Mid-Year Update. In the region, Saudi Arabia’s deals landscape remained stable, driven by the ambitious Vision 2030 and the National Transformation Program, which have opened new M&A opportunities for both local and international investors, strengthened the private sector, and significantly enhanced the Kingdom’s overall investment environment.
The Kingdom’s Public Investment Fund (PIF) has also been a key driver of its economy, directing investments into crucial sectors. The robust deal-making climate reiterates the Kingdom’s growing appeal as an investment hub, demonstrating its ability to attract capital and maintain momentum in M&A activity, even in the face of broader global challenges. The steady non-oil GDP growth, at 3.7 percent, has also reinforced the Kingdom’s position as a leading destination for global investment.
Earlier this year, business leaders in the Kingdom had expressed strong optimism about the positive economic trajectory for the year ahead. A significant 89 percent of CEOs surveyed expressed confidence in the Kingdom’s economic growth over the next year, as indicated in our latest 27th Annual CEO Survey: Saudi Arabia findings. This is significantly higher than the global average of 44 percent and even surpasses the Middle East regional average of 73 percent.
Key drivers for robust deals landscape
Vision 2030 agenda boosts M&A activity
As a key driver of Saudi Arabia’s Vision 2030 reform programme, the PIF is focused on the home advantage and is promoting growth of high-priority sectors in the Saudi economy. PIF’s investments span a wide range of sectors, including technology, aerospace, defence, automotive, transport, logistics, and food and agriculture, with the aim to expand and strengthen strategic sectors across the Kingdom.
Recent examples of PIF’s influence include its acquisition of a $2.3 billion majority stake in stc Group’s tower unit, TAWAL, and a 40 percent stake in Zamil Offshore. These deals reinforce PIF’s strategy to consolidate key sectors and strengthen its capital base, while positioning itself as a major player in infrastructure and maritime services. Another notable transaction is ACWA Power’s sale of a 30 percent stake in Rabigh Arabian Water & Electricity Company (RAWEC) to Hassana Investment Company, aimed at boosting RAWEC’s market position and future growth.
In addition to direct acquisitions, rights issues have become a significant tool for listed companies in Saudi Arabia to raise capital and drive M&A activity. ACWA Power’s SAR7 billion capital raise, for example, will allow the company to triple its assets under management by 2030. Similarly, Savola’s distribution of its 34.52 percent stake in Almarai to its shareholders illustrates how such mechanisms are shaping the landscape of corporate growth and sector consolidation in Saudi Arabia. These moves collectively underscore PIF’s and the broader market’s commitment to economic diversification and industrial development.
Privatization unlocks investment opportunities
Saudi Arabia’s ambitious push to privatize key state-owned assets, such as airports, water, sports and energy services, represents a pivotal shift in its economic landscape and opens up vast opportunities for both local and international investors. With investments now surpassing $50 billion, the Kingdom is actively pursuing private sector involvement across critical areas like energy, infrastructure, healthcare, education, tourism, and entertainment.
Although Saudi Arabia’s privatization efforts are relatively recent, they have already yielded significant results, signalling strong progress in fostering public-private partnerships. As part of these efforts, the health sector is incorporating hospitals, health services, laboratories and radiology, whereas the education sector will include academic establishments. In July the ministry of sport announced that 14 football clubs would be opened to investment from domestic and foreign investors. This is part of the Kingdom’s broader investment in sports under the sports ministry’s sports clubs’ investment and privatization project that aims to enhance Saudi Arabia’s global profile as a destination for tourism and recreation.
Consolidations surge in high-growth sectors
The M&A market in Saudi Arabia is witnessing a notable uptick in consolidations, primarily driven by sectoral reforms and strategic initiatives linked to Vision 2030. A prime example is the recent acquisition of Hail Cement by Qassim Cement for $378 million through a share-swap agreement in June 2024, making it one of the five largest Middle East M&A transactions in the first half of 2024.
This consolidation trend is likely to continue, particularly in high-growth sectors, as the market seeks to streamline operations by absorbing low-performing players and improving overall efficiency, while simultaneously building globally competitive companies. The construction sector is also seeing consolidation amid Saudi Arabia’s development boom, with the total value of awarded projects expected to reach $569 billion between 2021 and 2025.
Digital transformation fuels surge in tech deal making
Saudi Arabia’s prioritization of digital transformation is fueling a surge in M&A activity within the tech sector, particularly in data centres, fintech, and digital infrastructure. In March, Amazon Web Services announced a $5.3 billion investment to establish data centres in Saudi Arabia by 2026. Bold plans of the creation of a $40 billion fund dedicated to AI investments will likely further drive M&A activity in the sector. Alat, Saudi Arabia’s advanced manufacturing champion, has a focus on sectors including AI infrastructure and semiconductors and has indicated an interest in partnering with US companies.
Private equity activity gains momentum
Private equity activity in Saudi Arabia has been also gaining momentum, capitalizing on the availability of high potential growth opportunities across various sectors. Recent private equity investments underscore this trend. For instance, Jadwa Investment acquired a 60 percent stake in Tikkaway, a homegrown restaurant chain with plans to double its branches across Saudi Arabia within the next two years. Another key development is the entry of global and regional investors into Saudi Arabia’s burgeoning tech and e-commerce sector. Investcorp led a $130 million pre-IPO investment in Salla, a leading SaaS e-commerce platform, alongside Sanabil Investment, a subsidiary of PIF, and STV, a regional venture capital investor. This transaction points to the increasing appetite for digital transformation in the Kingdom, a central pillar of Saudi Arabia’s Vision 2030.
The healthcare sector is also poised for substantial growth, attracting significant private equity investments. Gulf Islamic Investments recently made a $164.6 million investment in Saudi-based healthcare provider Abeer Group, further reinforcing the sector’s potential. With Saudi Arabia planning to invest over $65 billion in healthcare infrastructure, including new hospitals and healthcare centres, private equity firms see the sector as a long-term opportunity for growth.
These deals demonstrate the critical role of private equity in advancing Saudi Arabia’s economic diversification and development goals, aligning with the Kingdom’s vision of becoming a leading hub for investment in the Middle East.
Saudi Arabia leads GCC IPO market
The number of IPOs in the GCC remained strong in the first half of 2024, with Saudi Arabia leading the market. The Kingdom saw 19 IPOs in H1 2024, up from 17 in the same period in 2023.
In Q2 2024 alone, it dominated the GCC IPO activity, accounting for most proceeds. The Tadawul Main Market saw a significant increase in IPO volumes compared to the previous year, while the Nomu Parallel Market maintained steady momentum with several new listings. This sustained activity underscores the continued strength and resilience of Saudi Arabia’s capital markets. Other notable listings in Saudi Arabia included Saudi Manpower Solutions Company (SMASCO), which raised $240 million, and Rasan Information Technology Company, securing $224 million. This ongoing IPO activity underscores Saudi Arabia’s growing role in attracting foreign investment and driving dealmaking in the region.
The outlook: Bold investments in AI and sports
Looking ahead, Saudi Arabia’s M&A and IPO landscape is poised for continued growth. Consolidations in high-growth sectors like construction and real estate will likely remain a strong trend, as the Kingdom builds globally competitive companies. The tech sector is also expected to see further M&A activity, particularly with bold investments in AI and digital infrastructure, positioning Saudi Arabia as a regional leader in innovation. The Kingdom’s $40 billion AI fund and Abu Dhabi’s MGX fund reflect the region’s growing focus on AI and technology. Saudi Arabia’s sports sector is also rapidly expanding through major investments and strategic M&A activity, with the PIF eyeing further ventures in tennis, golf and other sports.
Despite the ongoing geopolitical conflict destabilizing regional economies and increasing operational risks, Saudi Arabia’s steady non-oil GDP growth and strong investor confidence in key sectors, such as sports, healthcare, and construction are expected to continue attracting both local and international capital.
With active mergers and acquisitions, a strong IPO momentum and growing private equity interest, Saudi Arabia is well-positioned to drive innovation and economic diversification, reinforcing its role as a regional powerhouse.
Imad Matar is ME deals advisory and transaction services leader at PwC Middle East. He is one of the founding members of PwC’s Transaction Services Group in the ME region, having joined the group in 2005. He is a highly experienced transaction services practitioner in Saudi Arabia and the region, having worked on over 500 transactions in over 20 years. Imad has also led the due diligence of numerous recent successful IPOs on the Saudi stock market. He holds an MBA from the American University of Beirut, and is a US Certified Public Accountant (CPA).
