While the global mergers and acquisitions (M&A) landscape experienced a downturn in 2025, the Middle East emerged as a surprising exception, witnessing a remarkable surge in deal activity. But here's where it gets intriguing: this growth was largely fueled by the region's sovereign wealth funds (SWFs), which strategically targeted sectors like artificial intelligence (AI), semiconductors, and data centers, often in collaboration with the United States. This trend not only defied global patterns but also highlighted the Middle East's evolving economic priorities and its deepening ties with global powers.
M&A in the Middle East Reaches a Three-Year Peak
The Gulf Cooperation Council (GCC), comprising Saudi Arabia, the UAE, Qatar, Kuwait, Bahrain, and Oman, saw M&A deal values and transaction counts soar in 2025, reaching their highest levels since 2022. By December 1, the region recorded USD72.7 billion across 554 transactions, marking a 170% increase in value and a 2.6% rise in deal count compared to 2024. The UAE and Saudi Arabia led the charge, with both nations reporting higher deal values in the fourth quarter of 2025 than in the previous quarter.
Big Deals in Energy and Infrastructure
Some of the most significant transactions were inbound acquisitions in the energy and infrastructure sectors. A standout example was Aramco's USD11 billion lease and leaseback agreement for its Jafurah gas processing business, involving a consortium led by Global Infrastructure Partners. The financial services sector also saw notable activity, including the merger of Gulf Bank and Warba Bank in Kuwait, and other ongoing deals across the GCC.
Outbound M&A Aligns with National Ambitions
Middle Eastern SWFs were among the most active cross-border investors globally, driven by their governments' strategic objectives. These include diversifying economies away from fossil fuels, scaling domestic and regional champions, consolidating strategic sectors, strengthening international alliances, enhancing soft power, and investing in future-oriented industries. And this is the part most people miss: these investments are not just about financial returns but are deeply intertwined with national policy goals.
SWFs Seek Greater Control
As their influence grows, SWFs are increasingly pursuing controlling stakes rather than minority or passive investments. This shift reflects their ambition to shape the industries they invest in. Additionally, there's been a notable rise in international private equity and private credit funds investing in the region, often with a dual purpose: accessing Middle Eastern capital, including anchor investments from SWFs.
High-Profile Deals and U.S. Partnerships
One of the most high-profile SWF transactions of 2025 was the Saudi Public Investment Fund's (PIF) USD55 billion acquisition of video game developer Electronic Arts, alongside Silver Lake and Affinity Partners. This deal underscored the region's appetite for tech investments. But here's where it gets controversial: the Trump administration's policy shifts have been pivotal in facilitating these deals, including the rescinding of the Biden government's AI Diffusion Rule, which had imposed licensing restrictions on technology transactions with numerous countries.
Strategic Neutrality and Diversified Partnerships
While the U.S. remains a key partner, Middle Eastern governments are also leveraging their strategic neutrality to explore M&A opportunities in the People's Republic of China (PRC). This includes co-investments between regional SWFs and Asia-Pacific asset managers. China's Belt and Road Initiative and its Digital Silk Road program have been instrumental in fostering these relationships, with China becoming the GCC's largest trading partner as early as 2020. Thought-provoking question: Can the Middle East maintain its strategic neutrality while deepening ties with both the U.S. and China?
Regional Venture Capital and Digital Infrastructure
Middle Eastern SWFs are also focusing on domestic and regional opportunities, particularly in digital infrastructure and AI. Initiatives like Saudi Arabia's Humain, backed by PIF, aim to build up to 6GW in data center capability by 2034, partnering with tech giants like Nvidia and Cisco. The UAE's MGX, a dedicated AI fund, further exemplifies this trend. And this is the part most people miss: these investments are not just about technology but are integral to government diversification plans and job creation.
Strong IPO Performance
The Middle Eastern IPO market has also performed robustly, with 11 listings in Q3 2025 raising USD1.21 trillion. Saudi Arabia's Tadawul Stock Exchange led with eight listings, raising USD637 million. Looking ahead, 2026 is expected to be another strong year, driven by exits from the Saudi Public Investment Fund, scaled private companies going public, and family-owned businesses floating on the market.
Final Thought-Provoking Question: As Middle Eastern SWFs continue to expand their global influence, how will their strategic investments shape the geopolitical and economic landscape? Will their diversification efforts succeed in reducing dependence on fossil fuels, or will they face unforeseen challenges? Share your thoughts in the comments below!
