SEG’s SaaS – M&A and Public Market Report: 1Q25

Our friends at Software Equity Group have released their Q1 Public Market Report reflecting 1Q25 marking the most active quarter on record with 636 deals, up 19% quarter over quarter and 31% year over year.

As they observed, even with the mixed economic signals, strong buyer appetite persists.

HERE ARE 6 HIGHLIGHTS FROM THE REPORT:

1. The start of 2025 has been marked by a complex and often contradictory macro environment. While inflation is moderating and labor markets remain stable, ongoing trade tensions, geopolitical instability, and mixed economic signals have created an uncertain backdrop for decision-makers.
   
   In this environment, public and private investors are moving cautiously but continue seeking high-performing, resilient SaaS businesses that can weather volatility and sustain long-term value.
   
2. The SEG SaaS Index™ declined 13% in 1Q25, with the bottom quartile falling more than 25% while the top quartile declined just ~5.6%, a clear sign that investors are rewarding companies with consistent execution, retention, and margin strength.
   
3. SaaS M&A remained active, with 636 transactions in the quarter, up 19% QOQ and 31% YOY, the strongest quarter since 1Q22. Financial sponsors continue to lead the market, particularly in vertical SaaS and add-on acquisitions.
   
4. M&A valuations held steady, with the median EV/TTM revenue multiple at 4.1x, flat QOQ, and up slightly from 3.9x in 1Q24. The average multiple of 6.0x reflects continued appetite for premium assets, though buyers remain disciplined. Top-tier companies with strong retention, vertical focus, and profitable growth continue to command a clear pricing premium.
   
5. U.S. GDP grew 1.6% in 1Q25(1), slower than expected (estimates were ~2%) and inflation was at 2.4% YOY at the end of March(2), cooler than expected (Feb YOY was 2.8%). Many industry constituents are closely watching the impacts of tariff policy on growth, inflation, and unemployment. Still, buyer focus has not wavered on high-quality software assets.
   
6. Healthcare remains the most active vertical, accounting for 21% of vertical SaaS deals in 1Q25, as providers continue investing in digital infrastructure to modernize care delivery. Financial Services (15%) and Real Estate (10%) also saw elevated activity, reflecting sustained demand for industry-specific platforms in complex, regulated sectors.

To review the full report, click here.