Building Value Together: How Global and Local Players Can Navigate Saudi Arabia’s Capital Market Ecosystem for Successful Buyouts and Growth Equity Deals

Executive Summary: Saudi Arabia’s private equity and growth equity landscape is rapidly maturing under the Capital Market Authority’s robust regulatory framework, where success in buyouts and expansion deals depends on coordinated effort across stakeholders. Private equity firms lead deal structuring, often using Special Purpose Entities (SPEs) to raise sukuk or debt, while investment banks provide valuations, financing, and IPO planning. Consulting firms deliver commercial due diligence and post-deal transformation, law firms navigate CMA rules and safeguard shareholder rights, and limited partners such as pension funds and sovereign wealth funds anchor capital with strong governance expectations. Portfolio companies, meanwhile, must well execute with full compliance, aligned expectations, and incentive plan for themselves agreed with shareholders. When these players work in tandem, aligning world-class practices with Saudi regulations and Vision 2030 priorities, they not only achieve market-beating returns, but also create long-term value that advances the Kingdom’s economic transformation.

From ResearchGate.net, the diagram highlights that private equity is not just about deploying capital but about navigating a network of formal and informal relationships across the deal cycle from fundraising and deal flow to due diligence, monitoring, and exit. Regional contacts such as lawyers, accountants, and chambers of commerce provide trust, compliance, and contextual knowledge, while international players like placement agents, consultants, banks, and IPO advisers bring access to capital, technical expertise, and global exit opportunities. Success depends on blending these roles: contractual relationships ensure structure, informal exchanges build insight, and contextual information grounds decisions. Ultimately, PE is a relationship-driven business, where balancing local trust and global expertise enables deals to move smoothly and create value for shareholders.

Saudi Arabia has become one of the most dynamic investment destinations in the world. With the Kingdom’s Vision 2030 agenda pushing for diversification away from oil and toward sectors like healthcare, logistics, entertainment, and technology, private equity (PE) and growth equity deals are no longer exotic transactions, they are becoming mainstream.

But in Saudi Arabia, making such deals work requires more than just capital. Success depends on coordination between multiple players: private equity firms that sponsor deals, investment banks that structure financing, consulting firms that diagnose and transform businesses, law firms that navigate regulation, limited partners (LPs) that supply capital, and, of course, the portfolio companies themselves who must execute.

The Capital Market Authority (CMA) sets the rules of the game through regulations like the Rules for Special Purpose Entities (SPEs) and the Merger and Acquisition Regulations. These rules protect investors, but they also demand that every stakeholder knows their role and performs it well.

Let us walk through how each group contributes, and how they come together in practice.

Private Equity Firms: The Architects of the Deal

Private equity sponsors are the ones who see opportunity. For example, imagine a Saudi healthcare operator with a strong brand such as Dallah Health but limited expansion capital. A PE firm might step in, offering not just money but also governance and expertise.

• Structuring the Investment: In Saudi Arabia, PE sponsors often use Special Purpose Entities (SPEs) to raise debt or sukuk if necessary and most likely it will use equity to close the deal. These SPEs keep the assets legally separate, which reassures LPs that their investment is protected even if the sponsor runs into trouble.

• Ownership and Control: Under the M&A Regulations, if a PE firm acquires 40% or more of a listed company, it may trigger a mandatory tender offer to remaining shareholders. This means deal structuring isn’t just financial — it must comply with CMA rules.

  
  

Example: A Gulf-based PE firm once acquired a controlling stake in an education company in Riyadh. By using a CMA-approved SPE, they issued sukuk to finance expansion. The structure reassured local pension fund LPs, while the acquisition complied with CMA thresholds on ownership disclosure.

Investment Banks: The Deal Enablers

In Saudi Arabia, you cannot get far without investment banks. CMA rules require that both sides of a takeover appoint independent financial advisors.

• Valuations and Fairness: Banks provide fairness opinions, making sure shareholders know whether the price is fair. This is vital in a market where minority shareholders must be treated equally.

• Financing: Banks structure debt, sukuk, or bridge loans if necessary. For instance, when a PE firm wants to buy a logistics company to capitalize on Saudi Arabia’s booming e-commerce sector, the investment bank may arrange a sukuk issuance via an SPE.

• Exit Planning: Many PE firms in Saudi Arabia plan IPOs on Tadawul or the Nomu, parallel, market as an exit. Investment banks prepare the ground long before the actual listing.

Case in Point: When Saudi Aramco listed shares in its 2019 IPO, global investment banks structured the offering and stabilized prices post-listing. While that was a mega-deal, the same mechanisms, over-allotments, price stabilization periods, apply in PE-backed IPO exits.

Consulting Firms: The Value Creators & Strategists (or In-house consultants at PE)

A deal is only as good as the operational improvements that follow. Consulting firms play a quiet but decisive role.

• Commercial Due Diligence: Before a PE firm buys a Saudi service company, consultants test the company’s claims — is its market share real? Is its customer base sticky?

• Post-Deal Transformation: Once acquired, consultants may redesign supply chains, introduce digital platforms, or help recruit been there, done that executives.

• Sector Expertise: In sectors prioritized by Vision 2030 such as renewable energy or tourism, consultants often act as liaison between global investors and local market realities.

Example: A consulting team helped a Saudi retail company acquired by a foreign PE firm digitize its operations. Within two years, e-commerce revenues had doubled, enabling a lucrative IPO on Nomu market.

Law Firms: The Navigators of the Maze

Saudi Arabia’s regulatory framework is clear but demanding. Law firms often working in tandem, with a Saudi firm handling CMA filings and an international firm advising on cross-border elements, are essential.

• Regulatory Compliance: The rules for SPEs require independent Saudi legal opinions in certain cases. The M&A Regulations mandate legal advisors for both buyer and seller.

• Shareholder Rights: Target boards must treat all shareholders equally and cannot take “frustrating actions” to block genuine offers. Lawyers ensure these principles are respected.

• Dispute Prevention: Saudi law now offers clearer bankruptcy and insolvency protections. Legal counsel helps investors build these protections into contracts.

Example: In one cross-border buyout of a Saudi industrial firm, the foreign PE sponsor’s international counsel drafted the acquisition documents under English law, while a local Saudi firm ensured compliance with CMA disclosure and M&A requirements. Without both, the deal would not have cleared.

Limited Partners (LPs): The Anchors of Capital

LPs, such as Saudi pension funds, sovereign wealth funds, insurance companies, and increasingly global institutions, are critical. Their capital commitments provide credibility to a deal.

• Demand for Governance: LPs insist on transparency and reporting. CMA rules on SPEs reinforce this by requiring trustees, custodians, and auditors.

• Risk Management: Local LPs often prefer sukuk or asset-backed financing, aligning with Shariah principles. Foreign LPs may demand international reporting standards. Deals must satisfy both.

• Strategic Alignment: For Saudi LPs like PIF, alignment with Vision 2030 sectors is often a condition of investment.

Example: A consortium of foreign LPs, including a Canadian pension fund, invested alongside a Saudi sovereign fund in a healthcare buyout. The SPE structure reassured international LPs, while the sector focus aligned with Saudi strategic priorities.

Portfolio and Target Companies: The Execution Engine

Finally, no deal can succeed without the company itself.

• Disclosure and Compliance: Once listed, portfolio companies must make timely disclosures under the CMA’s continuing obligations rules.

• Management Buy-In: PE firms can bring capital and consultants, but if the CEO and management team don’t buy into the transformation, value creation can be hard to materialize.

• Cultural Fit: In Saudi Arabia, respecting labor laws, family business traditions, and Shariah compliance is not optional — it’s essential. Also, understanding how to navigate through the high-context conversation is equally important.

Example: A family-owned Saudi food company sold a majority stake to a regional PE firm. Success came only after the new owners persuaded the founding family to stay on in advisory roles, easing cultural transition while bringing in professional managers.

How Collaboration Works in Practice

Phase 1: Deal Origination

• PE firms spot targets after sourcing and preliminary due diligence.

• Investment banks provide initial financial models.

• Consultants test commercial viability.

• Law firms flag regulatory hurdles early.

Phase 2: Structuring and Financing

• Investment banks and law firms create financing via SPEs.

• LPs commit capital once governance and reporting standards are clear.

Phase 3: Execution

• CMA approvals are secured under M&A rules.

• Target company boards ensure equal treatment of shareholders.

• Legal and financial advisors file disclosures and prospectuses.

Phase 4: Post-Deal Value Creation

• Consultants or in-house consultants at PE drive operational upgrades.

• PE firms oversee governance and performance.

• Investment banks prepare for IPO exit or strategic sale.

• LPs monitor financial and operational metrics. And they may monitor ESG metrics.

Conclusion: Shared Success in a Saudi Context

Saudi Arabia is no longer an “emerging” capital market; it is now a regulated, sophisticated ecosystem that demands discipline and collaboration.

• PE firms provide vision and risk capital.

• Banks provide financial structuring and exits.

• Consultants deliver transformation.

• Lawyers ensure regulatory and contractual safety.

• LPs provide capital and governance discipline.

• Portfolio companies drive execution on the ground.

  
  

When each plays its part and when they collaborate effectively deals not only generate returns but also contribute to Saudi Arabia’s national economic transformation. That is value creation in its broadest sense.

Sources:

• M&A and SPE related files from CMA

Note: LLM is used to conduct capital market analysis between the two countries after uploading multiple capital market-related analysis. The final write-up is done by the author, Yazed Alsuhebany.