Complete Due Diligence Checklist for Mergers and Acquisitions in Saudi Arabia

Complete Due Diligence Checklist

Mergers and acquisitions in Saudi Arabia can help companies expand, enter new markets, acquire capabilities, or strengthen their market position. However, an M&A transaction involves more than agreeing on a purchase price.

Before completing an acquisition or merger, buyers need to understand the target company’s financial position, legal obligations, customers, employees, assets, tax position, licenses, and potential risks.

This is why Mergers and Acquisitions in Saudi Arabia  is an important part of the transaction process.

What Is M&A Due Diligence?

M&A due diligence is the process of investigating a company before completing a merger, acquisition, or investment.

The main objectives are to:

  • Verify financial performance
  • Identify hidden liabilities
  • Review legal and regulatory risks
  • Assess commercial opportunities
  • Validate the proposed valuation
  • Identify transaction risks
  • Support negotiation and deal structuring

Corporate Due Diligence

Review the company’s ownership and corporate structure, including:

  • Commercial Registration
  • Articles of Association
  • Shareholder information
  • Ownership structure
  • Subsidiaries and branches
  • Board and shareholder resolutions
  • Shareholder agreements
  • Corporate approvals

The buyer should confirm that the seller has the authority to transfer the relevant shares or assets.

Financial Due Diligence

Financial due diligence helps determine whether the reported financial performance reflects the actual condition of the business.

Review:

  • Audited financial statements
  • Revenue and EBITDA
  • Cash flow
  • Accounts receivable and payable
  • Debt
  • Working capital
  • Bank statements
  • Capital expenditure
  • Related party transactions
  • Financial forecasts

The findings can influence the purchase price and transaction structure.

Legal Due Diligence

Review:

  • Customer and supplier contracts
  • Lease agreements
  • Financing agreements
  • Government contracts
  • Litigation and disputes
  • Guarantees
  • Insurance
  • Change of control clauses
  • Existing legal claims

Special attention should be given to contracts that may require approval when ownership or control changes.

Tax and Zakat Due Diligence

Tax related risks can affect the value of an acquisition.

Check:

  • Zakat filings
  • VAT registration and returns
  • Tax returns
  • Tax assessments
  • Tax disputes
  • Withholding tax
  • Transfer pricing
  • Outstanding tax liabilities

Transaction specific tax treatment should also be reviewed before closing.

Commercial Due Diligence

Commercial due diligence evaluates the target’s market position and future growth potential.

Review:

  • Market size and growth
  • Competitors
  • Key customers
  • Customer concentration
  • Revenue growth
  • Pricing
  • Products and services
  • Customer retention
  • Sales pipeline

This helps determine whether the target’s future business assumptions are realistic.

HR Due Diligence

Employees can have a significant impact on an acquisition.

Review:

    • Employee contracts
    • Salaries and benefits
    • End of service obligations
    • Employee disputes
    • Key management
    • Employee turnover
    • Saudization requirements
    • Workforce structure

Regulatory and Licensing Due Diligence

Confirm that the business has the licenses and approvals required for its activities.

Check:

  • Commercial licenses
  • Sector specific licenses
  • Municipal approvals
  • Government permits
  • Regulatory registrations
  • License expiry dates
  • Compliance requirements

Foreign investors should also review applicable investment and ownership requirements.

Competition and M&A Regulatory Review

Some transactions may fall under Saudi Arabia’s economic-concentration framework.

The review should determine:

  • Whether the transaction qualifies as an economic concentration
  • Whether GAC notification is required
  • Whether applicable thresholds are met
  • Whether competition concerns may arise
  • Whether regulatory timelines could affect closing

Transactions involving listed companies may also require consideration of applicable Capital Market Authority (CMA) M&A and disclosure requirements.

IP and Technology Due Diligence

Review:

  • Trademarks
  • Patents
  • Copyrights
  • Domain names
  • Software licenses
  • IT systems
  • Cybersecurity
  • Data protection
  • Technology contracts

This is particularly important when intellectual property or technology represents a significant part of the company’s value.

M&A Due Diligence Process in Saudi Arabia

A practical process includes:

Define the transaction → Identify whether it is a share acquisition, asset acquisition, merger, or another transaction.

Prepare the information request → Create a structured checklist of documents required from the target.

Review the data → Analyze financial, legal, commercial, tax, HR, and regulatory information.

Identify risks → Classify material issues and assess their potential financial or operational impact.

Apply findings to the transaction → Use the findings to support valuation, negotiation, warranties, indemnities, conditions, and integration planning.

Quick M&A Due Diligence Checklist

Area Key Checks
Corporate Ownership, CR, company documents
Financial Revenue, EBITDA, debt, cash flow
Tax Zakat, VAT, tax liabilities
Legal Contracts, disputes, claims
Commercial Customers, competitors, market
HR Employees, contracts, benefits
Regulatory Licenses and approvals
Competition GAC requirements
Investment Foreign ownership requirements
IP Trademarks, patents, software
Technology IT and cybersecurity
Assets Property and equipment

Common M&A Due Diligence Mistakes

Companies should avoid:

  • Relying only on financial statements
  • Ignoring legal or tax liabilities
  • Accepting forecasts without validation
  • Overlooking customer concentration
  • Missing change of control clauses
  • Starting regulatory reviews too late
  • Ignoring post merger integration requirements

How M&A Advisers Can Help

Professional M&A advisers can support companies with:

  • M&A strategy
  • Target evaluation
  • Business valuation
  • Due diligence coordination
  • Financial analysis
  • Commercial analysis
  • Transaction structuring
  • Regulatory coordination
  • Negotiation support
  • Post-merger integration

Conclusion

Mergers and Acquisitions in Saudi Arabia should cover more than financial performance. Corporate structure, legal contracts, tax and Zakat, customers, employees, licenses, competition requirements, intellectual property, and technology can all affect the success and value of a transaction.

A structured checklist helps buyers identify risks early and use the findings to support valuation, negotiations, transaction structuring, and post-merger integration.

For businesses considering an acquisition, merger, or investment in Saudi Arabia, professional M&A advisory support can help coordinate the due diligence process and evaluate key transaction risks.

FAQ

  1. What is due diligence in mergers and acquisitions in Saudi Arabia?
    Due diligence is the process of reviewing a company’s financial, legal, tax, commercial, operational, and regulatory information before completing a merger or acquisition in Saudi Arabia.
  2. What should be included in an M&A due diligence checklist in Saudi Arabia?
    An M&A due diligence checklist should cover corporate documents, financial statements, tax records, contracts, licenses, employees, intellectual property, litigation, regulatory compliance, assets, liabilities, and commercial operations.
  3. What legal documents are checked during M&A due diligence in Saudi Arabia?
    Legal due diligence may include the company’s Articles of Association, Commercial Registration, licenses, shareholder agreements, material contracts, litigation records, intellectual property documents, and regulatory approvals.
  4. Is financial due diligence required for mergers and acquisitions in Saudi Arabia?
    Yes. Financial due diligence helps buyers assess revenue, expenses, assets, liabilities, cash flow, debt, working capital, financial risks, and the overall financial position of the target company.
  5. What tax matters should be reviewed during Saudi M&A due diligence?
    The review may include VAT, Zakat, corporate tax where applicable, withholding tax, tax filings, outstanding liabilities, assessments, penalties, and other relevant tax obligations.
  6. What regulatory approvals may be required for an M&A transaction in Saudi Arabia?
    Depending on the transaction and industry, approvals or notifications may be required from relevant Saudi authorities. The applicable requirements should be assessed based on the companies, ownership structure, transaction type, and regulated activities.
  7. How long does M&A due diligence take in Saudi Arabia?
    The timeframe depends on the size and complexity of the transaction, the industry, the number of entities involved, the availability of documents, and the scope of the due diligence review.

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