A brave new, virtual world – Saudi Arabia takes the lead in metaverse adoption

RIYADH: Amid the mergers and acquisitions boom in Saudi Arabia, the approval of economic concentration requests by the General Authority for Competition is reshaping the country’s business landscape, signifying a strategic shift toward market consolidation and growth.

Such oversight is required in the M&A market to ensure that they do not create monopolies or disrupt market competition.

Saudi Arabia saw a 17.4 percent surge in these approvals in 2024, reflecting the Kingdom’s efforts to strengthen its competitive business environment.

The rise aligns with GAC’s goal of implementing competition-enhancing policies, combating illegal monopolistic practices, and improving market performance to boost consumer and business confidence, attract investment, and promote sustainable development. 

Economic concentration requests approved impact on Saudi Arabia’s business landscape

The increasing number of economic concentration requests approved by GAC marks a significant shift in Saudi Arabia’s business landscape, signaling a trend toward strategic consolidation.

According to Imad Matar, PwC Middle East deals advisory and transaction services leader, the firm’s 2024 TransAct Middle East Mid-Year Update revealed that the Kingdom recorded 224 M&A deals valued at $ 7.6 billion in the first half of 2024, reflecting a 19 percent surge compared to the previous year.

“This surge in deal volume, alongside regulatory approvals, indicates that businesses are focusing on scaling up and enhancing their competitive market positioning, aligning with the Kingdom’s Vision 2030 goals,” Matar said.

“For local investors, this trend presents opportunities to form strategic partnerships, boost operational efficiency, and strengthen market presence. International investors will likely find Saudi Arabia increasingly attractive due to its favorable regulatory environment and growing focus on non-oil sectors,” he added.

The advisory and transaction services leader went on to note that the evolving business landscape offers diverse opportunities across industries such as technology, energy, and industrial manufacturing, which are central to the Kingdom’s economic diversification efforts. Martin Pavlica, principal at Kearney Middle East and Africa’s private equity and principal investors practice, explained that this shift indicates a more dynamic and competitive market environment in the Kingdom, thereby spurring an uptick in M&A activity. 

These developments align with KSA’s broader economic reforms and efforts to diversify the local economy under Vision 2030.

Martin Pavlica, principal at Kearney Middle East and Africa’s private equity and principal investors practice

“These developments align with KSA’s broader economic reforms and efforts to diversify the local economy under Vision 2030. Both local and international investors are increasingly encouraged to pursue deals and expand their presence in KSA,” Pavlica said.  

“This, in turn, is also contributing to the strengthening of the local capital market and robust IPO (initial public offering) activity. We expect these trends to continue proliferating in the coming years,” he added. 

The rise in economic concentration approvals also reflects the Kingdom’s evolving regulatory environment and growing investment activity.

Elif Koc, partner at Bain and Co., told Arab News that 2024’s dramatic increase in strategic inbound and domestic deal value benefits local investors by facilitating market consolidation and economies of scale, while international investors gain from increased regulatory transparency and investment clarity.

The partner highlighted that the largest deal in 2024 was Saudi Aramco’s $8.9 billion acquisition of Rabigh Refining & Petrochemical in the third quarter of the year.

“With the regulatory framework increasingly favoring competition and market efficiency, Saudi Arabia is expected to attract higher foreign direct investment, increase capital inflows, and strengthen corporate consolidation trends, further solidifying its position as a leading business hub,” Koc said.

According to Giuseppe Netti, head of Middle East and Africa sales at Bloomberg, there is increased deal-making across industries, which suggests companies — both domestic and international — are looking at consolidation as a way to scale, gain efficiencies, and compete more effectively.

“For local businesses, this creates a more competitive landscape that pushes firms to be more innovative and efficient. For international investors, it reinforces the idea that Saudi Arabia is actively shaping its regulatory framework to accommodate a growing economy, making it an increasingly attractive market for M&A,” Netti told Arab News, adding: “The key here will be ensuring that this wave of activity contributes to sustainable, long-term growth rather than short-term consolidation.” 

Current trend of increased M&A activity in Saudi Arabia alignment with Vision 2030

The rise in M&A activity in Saudi Arabia closely aligns with Vision 2030, which aims to diversify the economy and reduce reliance on oil revenues.

PwC’s Matar highlighted that the company’s report shows that in the first half of 2024, sectors such as technology, industrial manufacturing, and energy led M&A activity, with technology alone accounting for $1.4 billion in deals.

“This trend reflects the Kingdom’s push to become a global hub for innovation, particularly in the tech and green energy sectors,” he said.

The PwC representative added: “The National Transformation Program, a core component of Vision 2030, continues to unlock new opportunities for growth and investment. By attracting both local and international investors, M&A activity is helping to build a more competitive market.”

Matar also emphasized that as these investments fuel growth in non-oil sectors, they are instrumental in transforming the Kingdom into a diversified and resilient economy. 

By accelerating sectoral transformation and innovation, these deals will play a vital role in shaping the Kingdom’s long-term economic resilience​.

Elif Koc, partner at Bain and Co.

From Kearney’s perspective, the current trend of increased M&A activity aligns closely with Vision 2030 across three key areas: economic diversification, private sector enablement, and foreign capital attraction.

Javier Herrera, a partner at Kearney Middle East and Africa’s private equity and principal investors practice, said: “M&A activity in priority sectors such as technology, manufacturing, health care and logistics enables KSA to fully unlock their potential and support diversification objectives.”

As for private sector enablement, Herrera clarified that private sector companies can expand, innovate and become more competitive through M&A, which ultimately results in higher private sector contribution to gross domestic product.

On foreign capital attraction, he said: “Improved regulatory frameworks and economic policies have created a more business-friendly environment in KSA and positioned the country as one of the world’s most attractive FDI destinations.”

Bain and Co.’s Koc highlighted how energy, tech, and advanced manufacturing had seen strong growth in 2024, reflecting strategic shifts toward non-oil industries.

She said: “Outbound M&A transactions surged, with deal value for European targets increasing by over 100 percent YTD, while APAC deal value declined by 77 percent, indicating a preference for assets in Western markets. This shift supports Saudi’s ambition to integrate into global markets and enhance its investment footprint.”

Koc added that domestically, increased M&A contributes to job creation, technology transfer, industrial growth, and a more dynamic private sector, reinforcing Saudi Arabia’s non-oil GDP expansion goals under Vision 2030. 

“By accelerating sectoral transformation and innovation, these deals will play a vital role in shaping the Kingdom’s long-term economic resilience,” the Bain and Co. partner added.

Netti from Bloomberg shed light on how, from an investor’s perspective, the fact that companies are actively looking to expand, consolidate, or enter the Saudi market shows confidence in the country’s economic trajectory.

“It also supports the development of more competitive local players who can contribute to a stronger, more diversified economy. However, while deal volume is an important indicator, what really matters is whether these transactions drive long-term value creation, job growth, and innovation,” he concluded in that regard.

Long-term effects of the recent M&A boom shaping Saudi Arabia’s economy

Saudi Arabia’s M&A boom is likely to significantly shape the Kingdom’s economy and innovation landscape.

Matar explained that the PwC report showed that in the first half of 2024, the Kingdom’s M&A deals totaled $7.6 billion, with key sectors such as technology, renewable energy, and infrastructure leading the charge.

“As the country continues its transition toward a diversified economy, these investments will drive innovation in areas like AI, cloud computing, and green energy — key growth areas in line with Vision 2030. Saudi Arabia’s capital markets remain strong, with the Kingdom playing a pivotal role in regional M&A activity,” he said.

“The sustained growth in M&A transactions will bolster the Kingdom’s global competitiveness, reinforcing its position as a key player in regional and global markets. As the country strengthens its infrastructure and deepens its focus on non-oil sectors, Saudi Arabia is set to become an even more influential economic force, enhancing its competitiveness by 2025,” the PwC representative added.

Pavlica from Kearney projected that in the coming years, Saudi Arabia will see a marked increase in its industrial capabilities, localization efforts and advancements in innovation and technology.

“The recently announced $100 billion artificial intelligence initiative is set to drive cross-border acquisitions and partnerships, focusing on the transfer of cutting-edge technology and expertise to KSA,” he said, adding: “High-growth sectors including cloud computing and advanced manufacturing are expected to benefit significantly from foreign collaborations, fostering a robust local innovation ecosystem.”

Pavlica also believes that accelerated research, development, and commercialization of emerging technologies will further bolster Saudi Arabia’s global competitiveness.

Bain and Co.’s Koc explained how the Kingdom’s expansion into global markets through M&A activities signals a strong ambition for economic integration and leadership in key industries.

“Increased investments in R&D, renewable energy, and advanced manufacturing will boost innovation and industrial self-sufficiency, positioning Saudi Arabia as a high-tech and knowledge-based economy,” she said.

The Bain and Co. partner added: “As consolidation strengthens local enterprises, Saudi companies will become more competitive on the global stage, creating opportunities for international partnerships and capital inflows. With sustained M&A activity, the Kingdom is on track to solidify its status as a major global investment hub, securing the long-term economic impact of Vision 2030.”

If this momentum continues, key outcomes could include a more innovation-driven economy — with strategic M&A in sectors like fintech, AI, and renewables leading to more investment in R&D, making Saudi Arabia a hub for cutting-edge technology and entrepreneurship, according to Netti from Bloomberg.

It could also see stronger regional and global positioning as Saudi companies expand through acquisitions and become competitive on an international scale. 

“It will also lead to a deeper capital market ecosystem. With increased M&A often comes stronger capital markets, attracting institutional investors looking for exposure to a fast-evolving economy,” said Netti.

The Bloomberg official warned that sustained momentum will require a balanced regulatory approach to ensure that M&A activity continues to support competition and economic resilience. 

“Saudi Arabia is at a pivotal moment, and the focus should be on strategic transactions that drive real impact over the long term,” Netti said.

RIYADH: For startups aiming to go public, the path from early-stage to initial public offering is marked by critical transitions that simultaneously test the founders and the business itself. 

While many young companies achieve rapid initial traction, only a select few manage to scale sustainably and navigate the complexities of public markets. 

Investors who specialize in early-stage funding play a crucial role in shaping a startup’s foundation, ensuring that it is built for long-term success rather than short-term growth. 

“The journey from early-stage to IPO isn’t linear. It’s a series of hard transitions that test both the founder and the business,” said Mohammed Al-Meshekah, founder and general partner of Outliers, an early investor in Saudi Arabia’s Tabby, now valued at $3.3 billion and on track for an IPO. 

“The startups that make it aren’t just chasing trends; they’re solving real problems with deep, contrarian insights that others overlook,” he said in an interview with Arab News.

Identifying IPO-ready startups 

Early indicators of a startup’s potential to reach the IPO stage often lie in the strength of its founding team, market opportunity, and ability to scale efficiently. 

Mohammed Al-Zubi, managing partner and founder of Nama Ventures, which backed Saudi unicorns Salla and Tamara — both preparing for IPOs — believes that leadership resilience is one of the most defining factors. 

“The most critical factor is the founding team — their complementary skill sets, resilience, ability to adapt, and long-term vision define the company’s trajectory,” he told Arab News. 

“Markets change, challenges arise, but strong leadership ensures a startup can navigate uncertainty and sustain growth,” he added. 

Beyond leadership, Al-Zubi emphasized the importance of market opportunity and execution. 

“Companies that successfully go public are solving large-scale problems with high demand and room for expansion,” he explained. “A startup must not only show early traction but also demonstrate an ability to scale efficiently.” 

Financial discipline is another critical factor in determining whether a startup can reach the IPO stage. 

The journey from early-stage to IPO isn’t linear. It’s a series of hard transitions that test both the founder and the business.

Mohammed Al-Meshekah, founder and general partner of Outliers

“Investors and public markets look for companies that can balance aggressive growth with financial stability,” Al-Zubi said. 

Al-Meshekah agreed, saying: “The real test isn’t early traction, but instead whether the company can transition from hacking value to scaling growth, then from growth to real profitability.” 

He warned against chasing vanity metrics or unsustainable growth, stressing that “those who navigate these shifts deliberately are the ones that go the distance.” 

According to Al-Meshekah, a startup that is truly ready to scale “isn’t forcing growth; it has customers pulling the product, a repeatable engine for acquisition, and a clear path to sustainable unit economics.” 

Founders who succeed are not just fixated on their solution but are “obsessed with the problem,” he said. 

The Outliers’ founder added: “They adapt relentlessly, attract top talent, and shift from scrappy execution to scaling with precision.” 

Al-Zubi believes that the startups that reach IPO “embed financial discipline, governance, and strategic decision-making from the early days.” 

He added: “The best founders don’t just raise capital; they surround themselves with investors who challenge their thinking, push them toward scalability, and help them anticipate challenges before they arise.” 

While leadership, market fit, and financial discipline lay the groundwork for a potential IPO, Al-Meshekah argued that the role of venture capital extends far beyond funding. 

“VCs too often think their value lies only in capital and advice. But advice is cheap, and capital is a commodity,” he said. 

“Effective venture capital is not simply placing bets; they truly shape a startup’s foundation with active, hands-on partnership at the most critical moments.” 

Furthermore, Al-Zubi explained that venture capitalists who were once founders hold even greater value because they have the right empathy. 

Navigating key inflection points on the path to IPO 

As startups mature, they encounter critical inflection points that shape their ability to scale and eventually go public. 

These moments require strategic adjustments, from shifting organizational structures to strengthening financial discipline. 

Venture capital firms play a crucial role in guiding founders through these transitions, ensuring that their companies evolve in a way that supports long-term growth and IPO readiness. 

“The first major inflection point is shifting from finding product-market fit to scaling effectively,” Al-Meshekah said. 

He said that many startups get early traction, but that real scale comes only when there is genuine demand pulling the product. 

“At this stage, the right investors are in the trenches with founders as thought partners in their go-to-market motion, customer retention strategy, and organizational structure to build an effective growth engine,” Al-Meshekah added.

Beyond early scaling, startups must transition from founder-led operations to structured organizations capable of managing complex growth. 

“What worked at 20 employees won’t work at 200,” Al-Meshekah said, adding: “This is where hiring, leadership structure, and internal processes become make-or-break factors. A strong investor helps founders recruit exceptional leaders, align incentives, and avoid cultural dilution as the company grows.” 

Al-Zubi said that the first critical stage is post-seed and early growth, where founders must transition from proving product-market fit to building a repeatable, scalable business model. 

“This is when foundational decisions on hiring, expansion, and customer acquisition set the stage for long-term growth,” he said. 

Al-Zubi explained that the next major inflection point comes in the scaling phase, when companies move from early-stage agility to structured, process-driven growth.

“This is where operational efficiency, governance, and financial discipline become key,” he said. “If a company isn’t thinking about these factors by this stage, its ability to scale beyond a certain point is limited.” 

As companies approach an IPO, the emphasis shifts toward financial sustainability and governance. 

“Many companies sprint toward scale without ever proving they can operate efficiently at scale,” Al-Meshekah said. 

“At this stage, founders optimize margins, strengthen capital discipline, and shift the business model toward long-term value creation. Investors focus on bringing institutional governance and institutional processes.” 

Al-Zubi agreed that IPO readiness is not just about preparing financial statements in the final stages but about embedding public-market discipline early. 

“Startups that integrate strong governance and financial transparency early on find this transition far smoother than those that scramble to meet public market expectations,” he said.

“IPO readiness isn’t about a single moment — it’s about how a company has been built from Day 1.”