We recently got Software Equity Group’s SaaS M&A report for 2019. SEG is an investment bank focused SaaS companies and they put out fantastic data on what they’re seeing in the market. Key observations from their latest report are as follows:
Deal volume was a record. SaaS M&A saw 1,248 deals, up 27% compared to 2018 and an all time record. The ‘sales & marketing’ product category sees the most M&A relative to other categories. The healthcare vertical followed by real estate are the leading verticals of M&A volume.
Multiples are good. The median revenue multiple was 4.9x in Q4, another record.
Size drives multiples. Valuation is largely driven by company size. Organizations exhibiting scale are generally rewarded with higher multiples. Over the past 3 years, companies with revenue between $50mm to $100mm posted the highest median multiple (5.3x EV/Revenue). Also note in the graph to the right, more than half of transactions happened under 5.0x EV/Revenue while a third were over 7.0x.
Private equity. Private equity buyers represent over half of buyers (54%) which means they’re paying higher premiums than strategics; you shouldn’t only reach out to strategics when you go to sell.
Hiring a great banker is critical to maximizing value in an M&A process, and banks like Software Equity Group are who you should look to.
Visit us at blossomstreetventures.com and email us directly with Series A or B opportunities at email@example.com. We invest $1mm to $1.5mm in growth rounds, inside rounds, small rounds, cap table restructurings, note clean outs, and other ‘special situations’ all over the US & Canada. Feel free to connect with Sammy Abdullah on LI.