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SEG Snapshot: 2Q23’s SaaS M&A and Public Market Report

Software Equity Group’s quarterly report is in, they’re revealing an improved outlook across the broader macroeconomy, industry excitement around AI, and overall investor optimism for growth businesses contributed to a solid first half for publicly traded B2B SaaS companies.

Meanwhile, continued strategic buyer and private equity interest has resulted in strong M&A outcomes for high-quality SaaS businesses exhibiting capital efficient growth, strong retention, and product differentiation. 

Here are five highlights from the report:

1. Aggregate Software Industry M&A deal volume has seen strong momentum in recent quarters, reaching 897 total deals in 2Q23 and up 5% from 855 deals in 1Q23

2. Deal activity for SaaS M&A remains high relative to historical periods (538 in 2Q23). Although deal volume in 2Q23 experienced a 5% decrease over the prior quarter, SaaS M&A is on pace for the second-highest annual total in the last ten years (only eclipsed by the bubble year of 2022). The month of May saw 192 M&A deals, the second-highest monthly deal volume for SaaS in ten months.

3. The average EV/TTM Revenue multiple for 2Q23 was 5.6x. However, specific cohorts within SaaS are continuing to sell for premium multiples. Strong outcomes are being had for companies fitting the profile from a SaaS KPI (capital efficient growth, strong retention, etc.) and product differentiation standpoint.

4. Vertical SaaS comprised 46% of all M&A deals in 2Q23. Financial Services jumped up to the pole position of the verticals, representing 18.9% of all SaaS deals.

5. Private equity appetite for SaaS M&A remains high as it represented the majority (61.3%) of deals in 2Q23. PE-backed strategics represented 52.4% of deals, and PE platform investments were 8.9%.

Download the full report from Software Equity Group, here:

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