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: