RIYADH: Saudi Arabia’s private equity market reached $2.8 billion in total investments across 15 transactions in 2024, maintaining its billion-dollar scale despite a slowdown, according to MAGNiTT’s latest report.

This represents a 27 percent year-on-year decrease from $3.9 billion in 2023, signaling a shift in capital allocation amid evolving economic conditions. The number of private equity deals also dropped significantly, falling 60 percent from 37 transactions in the previous year.

This decline follows three consecutive years of growth from 2020 to 2023, during which the market saw a compound annual growth rate of 67 percent. Factors such as higher interest rates, inflationary pressures, oil price fluctuations, and regional geopolitical tensions played a role in the slowdown observed in 2024.

Philip Bahoshy, CEO of MAGNiTT, told Arab News that the Saudi private equity market had experienced “significant growth” between 2020 and 2024, with investment value surging from $215 million in 2020 to a peak of $3.9 billion in 2023.

“2024 saw a 27 percent year-on-year decline in investment value and a 60 percent drop in transaction volume, driven by a market recalibration toward higher-quality, mid-market growth opportunities over large-scale buyouts,” he said.

Despite the overall market contraction, growth-stage private equity transactions emerged as the most active segment, accounting for 67 percent of total deals in 2024, up from 43 percent in the previous year. In contrast, buyout transactions, which dominated in 2023, experienced a sharp 76 percent decline, with their share of total private equity deals dropping from 57 percent to 33 percent.

This shift reflects a growing investor preference for expansion-stage companies with strong scaling potential, rather than control-focused buyouts. Investment value trends further underscore this transition.

While buyouts still represented the largest share of private equity capital at 82 percent in 2024, they saw a significant 39 percent year-on-year decline, totaling $2.3 billion. Conversely, growth-stage investments, though representing a smaller 18 percent of total private equity investment value, experienced a notable surge from just 1 percent in 2023. This suggests a shift toward minority and expansion-stage investments in the deal mix.

Philip Bahoshy, CEO of MAGNiTT, forecasts that Saudi Arabia’s private equity market will stabilize over the next five years, evolving from the extreme volatility of 2020-24 into a more mature and steady investment landscape.

“In a forward look, several factors will impact the private equity landscape, like increased institutional participation, as sovereign wealth funds like PIF will continue to anchor private equity investments alongside a growing number of regional and international LPs (limited partners),” he said.   

Sectoral breakdown  

Saudi Arabia’s private equity market in 2024 was significantly driven by sector-specific trends, with the telecom and communications industry capturing the largest share of total investment value. The sector attracted $2.3 billion in private equity investments, accounting for 81.8 percent of total private equity funding.

This surge was largely fueled by a major buyout transaction involving Telecom Towers Co., underscoring continued investor confidence in the Kingdom’s telecommunications infrastructure.

Beyond telecom, the sustainability sector emerged as the second-largest recipient of private equity investments, securing $225 million, or 8 percent of total private equity funding.

Healthcare followed with $190 million, representing 6.7 percent of the total, benefiting from both private equity growth transactions and buyouts, with $188 million specifically allocated to private equity growth investments. Transport and logistics secured $83 million, or 2.9 percent, while financial services saw the least investment activity among the top five sectors, attracting $17 million, or 0.6 percent.

Despite telecom leading in total investment value, the industry transaction volume told a different story. The food and beverage sector was the most active in terms of deal count, registering three transactions, all of which were buyouts. Healthcare also recorded three transactions, split between two private equity growth deals and one buyout. Financial services and transport and logistics each saw two transactions, representing 13.3 percent of total private equity activity. Education, though smaller in terms of funding, accounted for one transaction, making up 6.7 percent of total private equity deals.

The overall distribution of private equity transactions in 2024 reflected a strategic shift toward sectors aligned with Saudi Arabia’s Vision 2030 goals. While buyout investments dominated in terms of capital allocation — capturing 82 percent of total private equity funding — private equity growth transactions accounted for nearly half, or 47 percent, of overall deal activity across key industries.

This trend suggests a growing investor appetite for mid-market and expansion-stage companies, particularly in sectors such as sustainability, healthcare, and financial services.

Philip Bahoshy emphasized that sectoral diversification will play a pivotal role in shaping the future of Saudi Arabia’s private equity market.

“Telecom, healthcare, and financial services remain dominant, while emerging industries like sustainability and logistics will likely attract increased capital,” he said.    

The continued participation of sovereign funds, regulatory enhancements, and foreign investment are expected to further solidify these trends, paving the way for a more stable and mature private equity landscape in the coming years, he added.   

“Furthermore, regulatory maturity and market depth, whereby reforms and Vision 2030 initiatives drive transparency and foreign investment, will enable the ecosystem to allow smoother exits and secondary markets,” he said.  

Deal sizes    

Transaction sizes also reflected this changing landscape. Deals in the $10 million–$200 million range remained the primary driver of Saudi Arabia’s private equity market, although their share fell from 72 percent in 2023 to 58 percent in 2024.    

Meanwhile, the proportion of transactions over $200 million rebounded to 29 percent in 2024, from 14 percent in 2023.  

Investment landscape  

“Saudi Arabia’s investment ecosystem is transforming strategically, driven by Vision 2030, regulatory enhancements, and increasing institutional participation,” Bahoshy said.    

He noted that private capital, spanning private equity, venture capital, and venture debt, is playing a complementary role in shaping the investment landscape.    

While private equity focuses on scaling mature businesses, VC remains a critical driver of early-stage innovation, particularly in fintech and e-commerce.    

Saudi VC funding peaked at $1.3 billion in 2023 before moderating to $750 million in 2024, while venture debt is emerging as an alternative financing tool for startups.     

As Saudi Arabia’s investment ecosystem matures, the interplay between private equity, VC, and alternative investment vehicles will be key in sustaining long-term economic diversification and capital efficiency.    

“As PE matures and M&A activity rises, VC-backed startups will have better liquidity options, strengthening the investment cycle,” Bahoshy said.   

The country’s recalibrated approach to private equity signals a shift toward a more measured and strategic capital deployment strategy, positioning the market for long-term stability and growth.   

“Saudi Arabia’s investment landscape is evolving into a multi-layered ecosystem where private equity drives scale, VC fosters innovation, and alternative investment vehicles provide liquidity and diversification,” Bahoshy said.   

“The interplay between these verticals will be essential in sustaining long-term economic diversification, capital efficiency, and investor confidence,” he added.