Future Opportunities in M&A

What are current Revenue and EBITDA multiples for SaaS companies?  Yesterday, I joined an inaugural discussion on SaaS valuations led by the The Fortia Group.  Together with Rob Belcher of SaaS Capital, Ryan Allis of SaaSRise, and Michael Dash of ThreeColts, we discussed SaaS M&A, valuation multiples, and thoughts on what 2025 might look like.  Whether you look at SaaS Revenue multiples, or EBITDA multiples, top quartile is a bigger delta from median valuations than ever before.  EBITDA multiples are higher overall (top quartile 30.7x), while revenue multiples range between 2.35x and 8.64x revenue, with a median revenue multiple of 5.71x according 2023 exit value data from DealEdge. According to the SaaS Capital Index of public SaaS, the median has risen to 7.3x as recently as November 2024.  Other insights: 1) Valuations, even when revenue growth is strong,  have moved away from "growth at all costs" to prioritizing "profitable growth." This aligns with broader trends in M&A that emphasize financial sustainability and operational efficiency over pure expansion metrics. 2) Rule of 40 (or even Rule of 50) is key to valuation - higher Rule of 40 is correlated with higher valuations. If strong revenue growth is elusive, then higher profit margins are valued. 3) Seller preparedness (1-2 years in advance), timing, and clarity are vital for maximizing valuation. Lengthy negotiation processes or lack of aligned interests among stakeholders can reduce valuations. Experienced advisors, proper documentation, and strategic timing are critical for optimal outcomes, per Emmett Kilduff of Fortia Group 4) Historically, rate cuts have led to significant increases in M&A volumes. With recent reductions in Federal Reserve rates and inflation, a positive outlook is expected for 2025. However, while Rob Belcher forecasted deal volumes to grow from 2024 but remain below 2021 and 2022 levels, Ryan Allis forecasted 2025 to be a record year for SaaS M&A deals. I forecast that in 2025, regardless of the number of deals, SaaS valuations would continue to be correlated with strong Rule of 40-50 and that higher valuations are given to companies with at least $10-$20M in ARR (ideally more than $50M) with stronger Rule of 40, than to smaller revenue companies. I'll put a link to download the presention in the comments.

M&A in private equity isn’t paused, but volumes have pulled back. I've spoken with dozens of customers over the past few weeks, and one topic keeps surfacing: how recent tariff changes and public market volatility are shaping M&A activity in private equity. Here are a few recurring themes from those conversations: 1️⃣ Sector-Specific Impact: In sectors where input costs are uncertain, deal activity has stalled. Buyers can’t confidently underwrite when they can’t forecast a P&L. But dry powder still needs deploying, so insulated sectors (like software and consumer services) are attracting disproportionate attention. Some industries remain hot; others are on hold. 2️⃣ Deals Are Prepped and Waiting: Sellers are ready. Funds are under pressure to generate DPI. Bankers have CIMs and data rooms polished. The only missing piece is macro clarity. A few large trade deals could unlock a wave of transactions. 3️⃣ Bankers Still Pitching: Despite slower volume, PE firms are engaging bankers for mandates. Everyone is preparing. It's not a matter of "if" deals will return—just "when." 4️⃣ Strategics Re-entering the Market: After a quiet few years focused on efficiency, strategic buyers are showing up again. Many are generating cash, have delevered balance sheets, and are looking to M&A to help accelerate innovation and revenue growth. The prospect of deregulation and a more merger-friendly antitrust environment is also fueling renewed M&A enthusiasm. 5️⃣ Debt Capital Is Available: Despite the headlines, lenders remain active. The private credit markets are deeper than ever, and for high-quality assets, financing is readily accessible. Debt capital isn’t the bottleneck—it’s uncertainty. 6️⃣ Medium-Term Optimism: The sentiment across the board is that M&A will rebound. Even if 2025 is slower than hoped, the setup for 2026 and 2027 looks strong. There’s pent-up supply, LPs demanding distributions, and record dry powder waiting in the wings. The spring is coiled. It just needs a catalyst. Funds can tap GP-led secondaries and refinancings to create liquidity—but only for so long. At some point, real exits need to happen. Now is the time to streamline operations and modernize infrastructure—before the rebound hits. Is your team ready? What signals are you watching?

📈 𝐃𝐞𝐚𝐥𝐒𝐜𝐚𝐩𝐞 | 𝘐𝘯𝘤𝘳𝘦𝘢𝘴𝘦𝘥 𝘔&𝘈 𝘈𝘤𝘵𝘪𝘷𝘪𝘵𝘺 {𝘸𝘪𝘵𝘩 𝘳𝘦𝘭𝘦𝘷𝘢𝘯𝘤𝘦 𝘧𝘰𝘳 𝘦𝘮𝘦𝘳𝘨𝘪𝘯𝘨 𝘤𝘰𝘮𝘱𝘢𝘯𝘪𝘦𝘴} Disclosed startup M&A exceeded $100 billion in the first half of 2025, a 155% increase over the same period last year (Crunchbase). While a portion of that came from large-cap transactions such as Google’s $32 billion acquisition of Wiz, the broader trend is more important: 𝘚𝘵𝘳𝘢𝘵𝘦𝘨𝘪𝘤 𝘢𝘯𝘥 𝘧𝘪𝘯𝘢𝘯𝘤𝘪𝘢𝘭 𝘣𝘶𝘺𝘦𝘳𝘴 𝘢𝘳𝘦 𝘳𝘦-𝘦𝘯𝘨𝘢𝘨𝘪𝘯𝘨, 𝘢𝘯𝘥 𝘢𝘤𝘵𝘪𝘷𝘪𝘵𝘺 𝘪𝘴 𝘱𝘪𝘤𝘬𝘪𝘯𝘨 𝘶𝘱 𝘢𝘤𝘳𝘰𝘴𝘴 𝘴𝘦𝘤𝘵𝘰𝘳𝘴. ⟡ The market is open to smaller, targeted acquisitions. The majority of transactions involve growth-stage companies with strategic positioning rather than scale. Examples include Stripe’s acquisition of crypto wallet startup Privy and Zscaler’s pickup of Red Canary. These transactions were not billion-dollar outcomes, but they created strong alignment between acquirer and target. ⟡ Outcomes are being driven by fundamentals, not hype. Even in sectors like AI, many buyers are focused on core technology fit, talent, or distribution leverage. This rewards founders who have invested in real product traction, even if revenue is still early. ⟡ 𝘏𝘦𝘢𝘭𝘵𝘩𝘤𝘢𝘳𝘦 𝘤𝘰𝘯𝘵𝘪𝘯𝘶𝘦𝘴 𝘵𝘰 𝘴𝘦𝘦 𝘮𝘦𝘢𝘯𝘪𝘯𝘨𝘧𝘶𝘭 𝘪𝘯𝘵𝘦𝘳𝘦𝘴𝘵. One of the largest transactions of the year was Modernizing Medicine’s $5.3 billion recapitalization with Clearlake Capital. Buyers remain active in vertical software, clinical decision tools, and services tied to efficiency and reimbursement. → For many companies, M&A is becoming the next round. Four years after the 2021 funding peak, many venture-backed companies are now weighing strategic outcomes more seriously. Continued fundraising remains an option, but M&A has re-emerged as a credible and, in some cases, preferable path. ⁘ 𝘗𝘦𝘳𝘴𝘱𝘦𝘤𝘵𝘪𝘷𝘦: For emerging growth companies, the return of M&A provides an opportunity to align with the right strategic partner before market conditions shift again. These transactions do not require billion-dollar scale. A compelling narrative, focused execution, and thoughtful positioning can drive strong outcomes, even in the $25 to $150 million range. ❯ If you are thinking about capital strategy or starting to evaluate options, I would be glad to have a conversation. #MergersAndAcquisitions #StartupExit #StrategicCapital #HealthcareInnovation #VentureCapital #SierraPacificPartners

I just got this cold email about a $100M CPA roll-up fundraise. They’re looking to scoop up smaller $2M-$7M CPA firms. The playbook is to consolidate stateside and build a global back-office in India. If you asked me a few years ago whether mid-market accounting firms would become the next frontier of private equity, I’d have said it was inevitable—but not this fast. I went deep in my last newsletter on this so I'll keep it short here on why 2025 will be a game changer for acquisitions: • Hyper-Consolidation: PE groups are racing to roll up U.S. CPA firms, leveraging offshoring to boost margins. That means more deals, faster closings, and bigger valuations going into 2025.    • Yet Some Firms Won’t Sell: Interesting twist—the best-performing firms are holding tight, aiming for generational wealth and long-term growth rather than a quick exit. They see the heightened M&A frenzy and think, “We can do it ourselves.”    • Global Reach: With expansions into India, Singapore, and Dubai, we’re looking at increasingly cross-border micro-mergers—it’s not just local or regional anymore. Firms want to tap global talent and build 24/7 operations.    • Tech-Centric Valuations: My 2025 prediction still holds—deal pricing will hinge heavily on technology and data analytics capabilities. If you’re just a “normal” compliance shop, you might be undervalued.    • Succession Solutions: Private equity is turning partner retirements into strategic exit or growth opportunities, but again—the highly profitable boutique firms are more interested in forging a legacy than selling out. Here's my question--and I'm not sure if I really know the answer yet. Will small to mid-sized firms leap at the chance for outside capital, or will they take a page from the niche/boutique firms and focus on going at it alone and building generational wealth? This is obviously NOT investment advice and I have no affiliation nor interest here—just an on-the-ground report from someone who is tracking firm deal flow.

Five Key M&A Drivers to Watch in 2025 Raj Karia, Head of Corporate, M&A, and Securities for Europe, Middle East, and Asia at Norton Rose Fulbright, identifies the following: 1. 𝗠𝗼𝗿𝗲 𝗴𝗲𝗼-𝗽𝗼𝗹𝗶𝘁𝗶𝗰𝗮𝗹 𝗰𝗲𝗿𝘁𝗮𝗶𝗻𝘁𝘆: last year, over 100 democracies (home to around half the world's population) chose their political leaders. We now expect greater political certainty for a number of years in many countries, including the US, UK, India, and the EU. 2. 𝗜𝗺𝗽𝗿𝗼𝘃𝗲𝗱 𝗺𝗮𝗰𝗿𝗼-𝗲𝗰𝗼𝗻𝗼𝗺𝗶𝗰 𝘀𝗲𝗻𝘁𝗶𝗺𝗲𝗻𝘁: central banks have been working to control inflation which is now beginning to return to trend/target levels. This will give CEOs and private equity leaders more confidence around valuations. 3. 𝗥𝗲𝗴𝘂𝗹𝗮𝘁𝗼𝗿𝘆 𝗹𝗼𝗼𝘀𝗲𝗻𝗶𝗻𝗴: expect gradual moderation of the regulatory environment over the next few years in a number of the largest economies around the world. This will create new M&A opportunities. 4. 𝗔𝘃𝗮𝗶𝗹𝗮𝗯𝗶𝗹𝗶𝘁𝘆 𝗼𝗳 𝗰𝗮𝗽𝗶𝘁𝗮𝗹: private equity continues to hold significant dry powder which should spur further M&A activity. Corporate CEOs will look to position their organizations for the future and will have better access to equity/debt markets. 5. 𝗙𝗮𝘀𝘁-𝗲𝗺𝗲𝗿𝗴𝗶𝗻𝗴 𝘀𝗲𝗰𝘁𝗼𝗿𝘀: the increasing pace of the energy transition agenda in all economies; the opportunities and challenges created by AI; the ageing population and need for more complex healthcare; the pace of technological change will all spur innovation and therefore M&A. Link to the full article in the comments 👇

Private Equity deal activity is rising, but so is the urgency to put capital to work and generate returns. 95% of PE firms report evaluating more deals than a year ago, driven by record dry powder and an improving rate outlook. Yet, firms are navigating a tightening deal environment that demands sharper execution. 𝗛𝗲𝗿𝗲’𝘀 𝘄𝗵𝗮𝘁’𝘀 𝘀𝗵𝗮𝗽𝗶𝗻𝗴 𝗣𝗿𝗶𝘃𝗮𝘁𝗲 𝗘𝗾𝘂𝗶𝘁𝘆 𝗱𝗲𝗮𝗹𝗺𝗮𝗸𝗶𝗻𝗴 𝗶𝗻 𝟮𝟬𝟮𝟱: 📉 Economic Uncertainty is Adding Complexity: Inflation concerns and potential tariffs are lengthening the due diligence process but not slowing deal activity. Investors are taking a more disciplined approach to structuring transactions. 💰 Interest Rates May Stay Higher for Longer: KPMG US economists now anticipate rates staying flat until mid-2026, requiring firms to adjust financing strategies and balance capital deployment with cost of capital realities. 🔄 The Clock is Ticking on Alternative Liquidity Options: Secondary transactions and continuation funds have provided temporary relief, but investors expect real liquidity. Firms must sell long-held assets and return cash—holding out isn’t a long-term solution. One notable shift: AI is now a core part of Private Equity dealmaking. 85% of PE firms are already implementing or planning to implement Generative AI—up from 61% last year—using it to streamline deal sourcing, enhance due diligence, and accelerate post-merger integration. As competition for high-quality assets intensifies, AI is becoming a critical tool for efficiency and insight in the M&A process. With capital to deploy and exits to deliver, private equity firms face a pivotal year. The fundamentals for dealmaking remain strong, but firms will need to execute with agility and discipline in an evolving market. Read the full KPMG 2025 M&A Deal Market Study: https://lnkd.in/g5JAhcuG. #KPMGPrivateEquity #MergersAndAcquisitions #PrivateEquity #CorporateStrategy #ValueCreation

Best year for startup M&A ever? 2025 is shaping up to be an exciting time for startup acquisitions. Across company sizes, the first half of 2025 came in hot with deal activity. If the trend holds through H2, it's likely that we'll see more Carta startups acquired this year than ever before. Data splits acquisitions by the amount of cash raised by the acquired company. So a company that had raised $8M (likely a Seed / Series A business) would fall into the orange bars below. 𝗗𝗮𝘁𝗮 𝗧𝗵𝗿𝗼𝘂𝗴𝗵 𝗤𝟮 𝟮𝟬𝟮𝟱 • 126 companies acquired after raising $1M-$10M • 100 acquired after raising $10M-$50M • 48 acquired after raising $50M+ 𝗪𝗵𝗼 𝗔𝗰𝗾𝘂𝗶𝗿𝗲𝘀 𝗧𝗵𝗲𝘀𝗲 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀? • PE shops (lower to middle market) • Big Tech • Other startups Of course it should be stated that just because a company has an acquisition does NOT mean that the founders and employees made a bunch of money. In many cases, it's likely that the investor preference ate into the final sale price and common stockholders came away with relatively little. This is anecdotal (not my favorite type of data), but it does sound like deals in 2025 are a bit more lucrative than those in 2023 and 2024. Startups have gotten their books in order, cut capital spend, and made many other changes to increase their attractiveness to potential buyers. Anyway, this is all good for the ecosystem at large. More M&A = hopefully more dollars back to funds = more DPI for LPs = more venture. And less need for these icky Windsurf acqui-licensing-blahs. Good luck on your future deals, founders! #startups #acquisitions #M&A #founders