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SEG’s 2024 SaaS M&A Public Market Report: Q1 

Software Equity Group’s Q1 M&A Report is in, revealing that the start of the year brings strong software deal volume, totalling 823 deals in 1Q24.

Despite a recent decline in SaaS M&A activity over the past two quarters, the 486 SaaS deals in 1Q24 far surpass pre-2022 levels, marking a 50% increase from the Q1 average of 2019-2021.

Here are 5 Highlights from SEG’s: 1Q24 SaaS Report:

  1. AGGREGATE SOFTWARE INDUSTRY M&A DEAL VOLUME HAS SETTLED into a steady state that remains strong relative to historical standards, recording 823 total deals in 1Q24, a similar level to 1Q23. The trend shows a steady increase compared to pre-COVID levels, with ‘21 and ‘22 representing a period of
    unprecedented M&A volume.

  2. DEAL ACTIVITY FOR SAAS M&A HAS SEEN LESS VOLUME IN THE LAST TWO QUARTERS. This trend is likely caused by a myriad of compounding variables, including regional bank instability in early 2023, macroeconomic concerns, and a high-interest rate environment that have all had lagging impacts on volume.

    With the Fed planning to cut interest rates three times this year, deal volume is expected to increase. Despite a few lighter volume quarters, the 486 deals SaaS deals in 1Q24 remain well above pre-2022 levels, up 50% from the 2019-2021 Q1 average.

  3. THE MEDIAN EV/TTM REVENUE MULTIPE FOR 1Q24 WAS 3.8X in line with 4Q23. Over the last three quarters, both the median and average EV/TTM revenue multiples for SaaS M&A have stabilized, indicating that the M&A market has fully responded to a higher interest rate environment and caught up to the public SaaS market.

    M&A valuations for the remainder of 2024 will be impacted by the Fed’s interest rate-cutting trajectory, but in the interim, highperforming businesses continue to receive strong outcomes in the M&A markets.

  4. VERTICAL SAAS COMPRISED 49% OF ALL SAAS M&A DEALS in 1Q24, continuing the trend of buyers and investors seeking the types of purpose-built, mission critical applications that are the calling card of vertical software companies.

    Healthcare and Financial Services represented the most active verticals this quarter. However, several other verticals, including Hospitality, Retail, and Manufacturing, saw increased activity YOY, indicating that the buyers and investors are not just looking for deals in historically active verticals but rather widening their focus to comprise a variety of verticals.

  5. PRIVATE EQUITY CONTINUED TO PACE SAAS M&A ACTIVITY (59% of 1Q24 deals), driven by PE-backed strategics (48%) that continue to leverage an ideal mix of product synergies and capital allocated to M&A. Strategic buyers (40.7% of Q1 deals) had their most active two-quarter stretch since 1Q22.

To read the full Software Equity Group’ SaaS M&A and Public Market Report, click here.