0:00
0:00
Saudi Arabia's Private Equity Market Sees $2.8 Billion Investment in 2024
Despite a decline in transaction volume, the Saudi private equity sector shows resilience with significant sectoral shifts.
Saudi Arabia's private equity market recorded total investments of $2.8 billion across 15 transactions in 2024, according to a recent report, marking a 27% decrease from $3.9 billion in 2023. This decline reflects broader economic adjustments and follows three years of exceptional growth where investments surged from $215 million in 2020 to $3.9 billion in 2023, illustrating a compound annual growth rate of 67%.
The reduction in investment value and the 60% drop in transaction volume—down from 37 deals in the previous year—can be attributed to various factors, including higher interest rates, inflation, oil price volatility, and regional geopolitical uncertainties.
Philip Bahoshy, CEO of MAGNiTT, commented on the market's transition, noting that 2024 saw a recalibration toward mid-market growth opportunities, favoring expansion-stage companies over large-scale buyouts.
Growth-stage private equity investments accounted for 67% of total transactions, an increase from 43% in 2023, while the share of buyout transactions plummeted from 57% to 33%, reflecting a 76% year-on-year decline in that segment.
Despite buyouts maintaining the largest share of capital at 82%, their investment value dropped significantly by 39%, totaling $2.3 billion.
In contrast, growth-stage investments rose sharply, comprising 18% of total private equity investment value, up from a mere 1% the previous year.
This shift underscores a growing preference among investors for minority stakes and expansion opportunities, indicating a strategic pivot in investment behavior.
In terms of sectoral performance, the telecommunications and communications industry was the leading recipient of private equity, attracting $2.3 billion and representing 81.8% of the total investment.
This surge was largely driven by a significant buyout transaction regarding Telecom Towers Co. The sustainability sector ranked second, receiving $225 million, or 8% of total funding, followed by healthcare, which secured $190 million, or 6.7%, benefiting from both growth transactions and buyouts.
Transport and logistics attracted $83 million, while financial services captured $17 million, signaling reduced activity in that area.
Transaction volume presented a different narrative; the food and beverage sector led with three transactions, all buyouts, closely followed by healthcare with a similar number of deals split between growth and buyout categories.
Financial services and transport/logistics accounted for two transactions each.
Overall, the distribution of private equity investments in 2024 aligns with the objectives detailed in Saudi Arabia's Vision 2030, emphasizing a strategic investment approach targeted at sectors poised for sustainable growth.
With buyouts accounting for the lion's share of capital allocation—82%—growth transactions also made significant impacts, constituting nearly half (47%) of the overall deal activity across key industries.
Transaction sizes also reflected changes in the private equity landscape, with deals in the $10 million–$200 million range declining from 72% in 2023 to 58% in 2024. Meanwhile, larger transactions exceeding $200 million rebounded to 29% from 14%.
Bahoshy remarked that the transformation of Saudi Arabia's investment ecosystem is being shaped significantly by Vision 2030, enhanced regulatory frameworks, and the rise of institutional participation.
Private capital across various forms—including private equity, venture capital, and venture debt—continues to influence the investment landscape profoundly.
While private equity primarily scales established companies, venture capital remains critical for early-stage innovations, particularly within fintech and e-commerce.
In 2024, Saudi VC funding reached $750 million, following a peak of $1.3 billion in 2023, as venture debt emerged as a vital financing alternative for startups.
The evolving interplay between private equity, venture capital, and alternative investment strategies is anticipated to be crucial for sustaining economic diversification and capital efficiency in the Kingdom.
The reduction in investment value and the 60% drop in transaction volume—down from 37 deals in the previous year—can be attributed to various factors, including higher interest rates, inflation, oil price volatility, and regional geopolitical uncertainties.
Philip Bahoshy, CEO of MAGNiTT, commented on the market's transition, noting that 2024 saw a recalibration toward mid-market growth opportunities, favoring expansion-stage companies over large-scale buyouts.
Growth-stage private equity investments accounted for 67% of total transactions, an increase from 43% in 2023, while the share of buyout transactions plummeted from 57% to 33%, reflecting a 76% year-on-year decline in that segment.
Despite buyouts maintaining the largest share of capital at 82%, their investment value dropped significantly by 39%, totaling $2.3 billion.
In contrast, growth-stage investments rose sharply, comprising 18% of total private equity investment value, up from a mere 1% the previous year.
This shift underscores a growing preference among investors for minority stakes and expansion opportunities, indicating a strategic pivot in investment behavior.
In terms of sectoral performance, the telecommunications and communications industry was the leading recipient of private equity, attracting $2.3 billion and representing 81.8% of the total investment.
This surge was largely driven by a significant buyout transaction regarding Telecom Towers Co. The sustainability sector ranked second, receiving $225 million, or 8% of total funding, followed by healthcare, which secured $190 million, or 6.7%, benefiting from both growth transactions and buyouts.
Transport and logistics attracted $83 million, while financial services captured $17 million, signaling reduced activity in that area.
Transaction volume presented a different narrative; the food and beverage sector led with three transactions, all buyouts, closely followed by healthcare with a similar number of deals split between growth and buyout categories.
Financial services and transport/logistics accounted for two transactions each.
Overall, the distribution of private equity investments in 2024 aligns with the objectives detailed in Saudi Arabia's Vision 2030, emphasizing a strategic investment approach targeted at sectors poised for sustainable growth.
With buyouts accounting for the lion's share of capital allocation—82%—growth transactions also made significant impacts, constituting nearly half (47%) of the overall deal activity across key industries.
Transaction sizes also reflected changes in the private equity landscape, with deals in the $10 million–$200 million range declining from 72% in 2023 to 58% in 2024. Meanwhile, larger transactions exceeding $200 million rebounded to 29% from 14%.
Bahoshy remarked that the transformation of Saudi Arabia's investment ecosystem is being shaped significantly by Vision 2030, enhanced regulatory frameworks, and the rise of institutional participation.
Private capital across various forms—including private equity, venture capital, and venture debt—continues to influence the investment landscape profoundly.
While private equity primarily scales established companies, venture capital remains critical for early-stage innovations, particularly within fintech and e-commerce.
In 2024, Saudi VC funding reached $750 million, following a peak of $1.3 billion in 2023, as venture debt emerged as a vital financing alternative for startups.
The evolving interplay between private equity, venture capital, and alternative investment strategies is anticipated to be crucial for sustaining economic diversification and capital efficiency in the Kingdom.
