M&ASEG 2023 Annual SaaS Report

SaaS continues to be an attractive asset class for private equity and strategic buyers. M&A deal volume in 2022 surpassed 2,000 transactions for the first time, a 21% increase over 2021. Private equity buyers with record amounts of dry powder drove volume and valuations, comprising nearly 60% of SaaS M&A deals, a record for annual activity, and accounted for some of the highest multiples in 2022.

Public market indices across the board struggled to overcome the tumultuous macroeconomic landscape of 2022. While multiples continued to decline from the unsustainable run-up in 2021 (14.7x), public SaaS companies in the SEG SaaS Index demonstrated operational resiliency. The median EV/Revenue multiple sat 15% higher than 2018’s pre-pandemic levels, which were considered healthy at the time. What’s more, recent indicators show inflation moderating and the potential easing of interest rate hikes, which should bode well for SaaS multiples going forward.

Report highlights include:

• The median SaaS M&A multiple of 5.6x surpassed the median SEG SaaS Index public market multiple and demonstrated a healthy environment for SaaS M&A deals, despite a decline from the nosebleed multiples of 4Q20-1Q22.
• Private equity continues to drive volume and valuations, accounting for a record 60% of SaaS M&A deals, including some of the highest multiples in 2022.
• While public SaaS valuations are depressed across the board, highly profitable businesses and companies with mission-critical solutions demonstrated resiliency and outperformed the broader index in valuation multiples. Download the report to see which categories fit the profile.

SEG’s 2023 Annual SaaS Report includes a comprehensive analysis of recent public stock market performance and M&A activity in the software industry. Download our complimentary report to explore the latest trends and learn more.