Our friends at Software Equity Group have released their Q2 Quarterly SaaS Report.
As they observed, even with the mixed economic signals, strong buyer appetite persists.
Austin Hammmer, Principle at SEG offers, “SaaS M&A has normalized at a structurally higher level, with Q2 marking another record quarter for volume.” The report reveals, “The market is strong, valuations remain compressed but are stabilizing meaningfully, with momentum building as buyers grow increasingly confident and prepare for a more favorable macro environment.”
Here, Sandhill summarizes two highlights from the M&A portion of the report, and two highlights from their SEG Q2 public market update.
2 SAAS M&A HIGHLIGHTS
- Aggregate software industry M&A volume remained strong in 2Q25, continuing the trend established in Q1. The broader market recorded 1,126 software M&A transactions in the quarter, matching 1Q25’s high watermark and reinforcing the post-COVID baseline of ~900+ deals per quarter.
This sustained activity reflects growing clarity around monetary policy, easing investor concerns tied to geopolitical volatility, and renewed urgency among buyers to capitalize on scalable, efficient platforms.
2. SaaS M&A continued its record-setting pace in Q2 with 637 transactions, the highest quarterly total SEG has tracked. That brought 1H25 volume to 1,273 deals, up 30% from 1H24. With four consecutive quarters of 530+ deals, SaaS has firmly re-enforced itself as a consistent and resilient engine of software M&A.
Recurring revenue, strong retention, and vertical specialization remain key attractors as platform strategies and sponsor activity fuel continued growth.
SAAS PUBLIC MARKET HIGHLIGHTS
- The SEG SaaS Index™ rose meaningfully from Q1 to Q2, narrowing its YTD loss to 9.1% after being down over 20% in March. Performance remained bifurcated, with top quartile companies rising 7.5% YTD, while the bottom quartile fell over 21%, highlighting growin valuation dispersion.
Investors rewarded consistent, efficient operators while penalizing those with unprofitable or inconsistent models. While broader equity markets posted modest gains on stable rates and easing inflation, public SaaS remained more sensitive to execution quality, with macro relief benefiting only the strongest names.
2. Valuations compressed, with the median EV/TTM revenue multiple falling to 5.1x, down from 5.9x in 1Q25 and 5.8x in 2Q24. However, dispersion remained wide: top quartile companies traded at 9.0x, compared to just 2.8x in the bottom quartile. Companies with >40% Weighted Rule of 40 scored 12.4x, nearly 2.5x the Index median, reinforcing that balanced performance still commands a premium.
Similarly, companies with 120% net retention traded at 11.1x, a 117% premium to the Index median, underscoring how deeply investors value durable, expanding customer relationships.
To download the full report, click here:
Clare Christopher is the editor at Sandhill.com