SaaS M&A Snapshot: Target Market & Buyers

A Closer Look at the 1Q20 SaaS M&A Update

SEG recently published our 1Q20 SaaS M&A Update. The report is a snapshot of M&A deal activity across the software industry. It includes historical deal volume by product category and vertical, valuation stats, most active buyers, notable deals, private equity activity, and more.

We want to discuss a few highlights from the report. We will dive into SaaS M&A activity target market focus, as well as acquisition activity by strategic and private equity parties during the first quarter.

Verticals in Demand:

Select verticals were highly active in 1Q20, where SaaS sellers saw a significant increase in interest from buyers. The top five most active verticals in 1Q20 include Healthcare, Financial Services, Education, Public Sector, and Real Estate. Private equity & strategic buyers placed an emphasis on Healthcare solutions, primarily those focused on Sales & Marketing, ERP, and Communications and Collaboration solutions. As referenced in the report, Healthcare M&A activity accounted for 32% of all vertical SaaS M&A activity during the first quarter, which was, by and large, the most active vertical. The second most active vertical, Financial Services, accounted for 13.9% of vertical SaaS M&A deals during the first quarter due to increasing need of software solutions for online and electronic payment systems.

Private Equity vs. Strategic:

Since the late 2010’s, private equity has been increasingly acquisitive in the software space, as the amount of capital in private equity funds has been exponentially growing. As shown on slide 26 of the report, strategic buyers and private equity driven deals each account for nearly half of M&A deals over each of the last four quarters. Publicly traded strategic buyers accounted for 11.7% of SaaS M&A deals, while 10.4% of transactions were acquisitions by private strategic buyers. Private equity firms making direct platform acquisitions accounted for 10.4% of M&A deals. In addition, a large focus for M&A activity were add-on acquisitions (38.9% of SaaS M&A deals), as these deals drive growth and expansion opportunities.

Please view the full report for more information on the SaaS M&A market.

We have resources available if you would like to understand strategic buyers’ or private equity investors outlook on the market. As always, please let us know if you have any questions, we’re here to help. Contact Us.

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