M&A trends in SaaS show premium revenue multiples are possible

An Investment bank called Software Equity Group puts out a fantastic overview of the SaaS M&A market every quarter.  It’s publicly available on their website, and below we summarize some of the high points. 


-The median revenue multiple is 4.6x.  There were 195 SaaS M&A deals in Q2 with a median revenue multiple of 4.60x. 195 deals is slightly below last quarter’s 205 deals, but the revenue multiple was a high over the past 3 years.  40% of the buyers were private equity backed software companies, 31% were public companies, 21% were private companies with no private equity sponsor, and 8% were private equity groups. 

-But that doesn’t mean 6x+ isn’t achievable.  Over the past 3 years, 29% of SaaS companies were acquired for 6x+, 41% sold at 3x to 6x, and 30% sold for 3x or less. 

-CRM & marketing are most active.  The most activity is in the CRM & marketing space (48 deals), followed by analytics and business intelligence (22 deals).  32% of companies acquired were vertically focused.  Top vertical categories by deal volume include Education (14.3%), Retail (12.7%), and Real Estate (11.1%).


-$20mm to $50mm of revenue is the sweet spot.  Over the last 3 years, companies with less than $5mm of revenue tend to sell for 2.9x on median, $5mm to $10mm of revenue sells for 3.5x, $10mm to $20mm sells for 4.0x, $20mm to $50mm sells for 4.9x, $50mm to $100mm sells for 4.4x, and $100mm+ sells for 3.8x.  There is a such thing as getting so big that you price out many potential buyers and limit what a buyer can pay, thereby pressuring your exit multiple. 

The full report is fantastic and well worth the read.  Thanks SEG.

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