Companies That Buy SaaS Businesses - Where to Sell
Companies That Buy SaaS Businesses - Where to Sell
Brian Dukes
Brian holds a Mechanical Engineering degree from Michigan Tech, where he also served as captain of the men’s basketball team. He began his career at Deloitte, earned his MBA from the University of Michigan, and later co-founded and scaled a technology agency to more than $1 billion in value. Today, he leads Exitwise, guiding founders through the M&A process with confidence and clarity, and has supported over $1 billion in successful business sales.
As a SaaS founder, you can either attract strategic acquirers, private equity firms, or individual operators. The buyer you attract shapes your valuation, your role after closing, and whether your product survives the transition.
So, you must understand which companies are actively looking to acquire your business and how they evaluate it as an M&A target.
Below, you’ll learn how to make your SaaS business attractive and what strategic SaaS buyers look for.
We’ve also explored a list of 9 companies that buy SaaS businesses in different categories.
TL;DR - Companies That Buy SaaS Businesses
In a rush?
Check out a quick overview of SaaS buyers:
Arising Ventures
Alpine Investors
AlleyWay Capital
Accel-KKR
Microsoft
Oracle
Salesforce
The Brydon Group
Relay Commerce
More on each of these companies later in the blog.
What Makes a SaaS Business Attractive to Buyers?
Wondering how to sell a SaaS business? You should first understand what buyers look for when buying a SaaS business.
Here are the 6 important factors:
Recurring Revenue: Buyers like a SaaS model with recurring revenue streams that provide a stable financial base. If your business is centered on a high-value subscription-based platform, it’s an attractive feature for potential buyers.
Operational Efficiency: Buyers want a SaaS business they can run without the founder. You should document all leadership roles, standard operating procedures, and hand-off responsibilities to address potential operational pitfalls.
High Gross Margins: Prospective buyers are interested in your business if it can cover all expenses and still retain enough to reinvest in growth.
SaaS Key Metrics: Prospective buyers look closely at the percentage of customers you’re able to retain each month. They analyze your gross revenue retention, cohort behavior, net revenue retention (NRR), and logo churn.
High Retention Rate: Buyers care about your customer retention rate. If your SaaS company has moderate growth but excellent retention, you’ll have a stronger demand than one growing rapidly with high churn.
SaaS Product Infrastructure: Buyers evaluate code quality, intellectual property (IP), data privacy compliance, and infrastructure scalability.
How Do Strategic Buyers Approach SaaS Acquisitions?
Strategic buyers, whether publicly traded or privately held, will acquire your Saas business if it’s aligned.
Here are their key priorities:
Expand into a New Market: They look for acquisitions that help them diversify their product range or tap new geographical markets where they currently have no foothold.
Assess Competitive Positioning: They evaluate how a SaaS M&A could reduce costs, enhance productivity, and streamline supply chains.
Fill a Product Gap: They aim to integrate your SaaS product into their existing offerings. They evaluate your API layer, intellectual property (IP), and technology stack. If your solution can allow clean integration, you become an immediate acquisition target.
Absorb Your Customer Base: They assess how they can leverage your customer base to create cross-selling and up-selling opportunities. They aim for a stable revenue stream without needing to build a new customer base.
Evaluate Cultural Alignment: They assess whether your SaaS company's culture and values align with theirs, whether it’s in communication habits, decision-making processes, or leadership styles.
Methods to Evaluate Acquisition Offers and Deal Structures
When closing the deal for your SaaS company, evaluate acquisition offers and deal structures to determine the payment timeline and associated risks.
Here’s what to consider:
Comparable Company Analysis (CCA)
This method assumes that the business's valuation should be comparable to that of similar businesses.
You benchmark your SaaS business against peers using metrics like ARR and retention rates.
The CCA uses SaaS valuation multiples of comparable companies, such as Enterprise Value to Revenue (EV/Revenue) and Enterprise Value to EBITDA (EV/EBITDA), to benchmark your offer.
Precedent Transactions Analysis
You can evaluate offers based on recent SaaS acquisition offers.
Unlike CCA, which looks at SaaS valuation multiples, this method examines the deal structure, buyer type, and the amounts buyers have paid for those acquisitions. It uses that data to establish how much buyers are likely to pay for your SaaS company.
Discounted Cash Flow (DCF) Analysis
DCF estimates the investment’s current value based on its expected future cash flow.
It uses a set of assumptions based on your business's past financial performance to predict how much cash it can generate over the next 5-10 years. This method determines if an investment is worthwhile by discounting the future cash flows to their present value (using a required rate of return).
Leveraged Buyout (LBO) Analysis
LBO analysis evaluates offers based on the risk assessment, future projections, and standard financial metrics.
It examines PE firms' leverage to acquire businesses with borrowed funds and the amounts they can realistically afford to pay. That means if your business records strong cash flow, you can command a higher purchase price.
Companies That Buy SaaS Businesses - Complete List
Let’s explore the common SaaS buyers in each category and their different goals.:
Private Equity (PE) Firms
PE firms buy SaaS companies and enhance their value over time before executing a profitable exit.
Check out the top 3 buyers:
Alpine Investors: It acquires and invests in software and service businesses with an enterprise value of up to $1B and EBITDA ranging from $1 million to $50 million.
AlleyWay Capital: Focuses on acquiring tech and digital companies at early or growth stages. The companies must be 3+ years old, offer subscription-based services, and have annual recurring revenue of $200,000 to $2 million.
Accel-KKR: Buys and invests in middle-market software and IT-enabled service companies with revenue ranging from $10 million to $200 million.
Strategic Acquirers
These buyers want to expand their SaaS product line, enter new markets, and acquire specialized technology.
Here are the top 3 companies in this category:
Microsoft: Known to dominate SaaS acquisitions that complement its tools like Office 365 and Azure. It acquires SaaS companies with high recurring revenue and strong retention rates, offering solutions that integrate with its existing systems. Microsoft ARR acquisitions range from $1 million to 75.4 billion.
Oracle: Focuses on buying SaaS companies with ARR of $10M+ that offer enterprise solutions, especially HR, ERP, and database management. The acquired companies must have a strong market share.
Salesforce: Acquires SaaS businesses that specialize in CRM and market tech solutions with an annual recurring revenue of approximately of $5M+. The companies must be well-established with a focus on customer-centric solutions.
Holding Companies or Aggregators
They acquire your SaaS company if it has a predictable ARR with an aim of owning and operating it long-term.
Below are the top buyers:
The Brydon Group: Buys vertical software and service-based SaaS businesses in highly regulated markets with revenue ranging from $10 million to $100 million. They focus more on B2B and B2C founder-led, bootstrapped companies valued at $15 million to $20 million.
Relay Commerce: Buys SaaS businesses with at least $1 million ARR, specializing in Ecommerce software tools for platforms like Shopify and Amazon. These businesses must have garnered strong reviews and rankings.
Arising Ventures: Acquires B2B tech businesses with an ARR of $3 million to $30 million. It focuses more on growth-stage companies.
A successful SaaS exit doesn’t start with finding a buyer but with partnering with M&A experts who can help you maximize your exit value.
At Exitwise, we help you hire and manage SaaS-specific M&A experts through our network of 4,000+ professionals with relevant experience.
Talk to our team, and let's connect you with pre-vetted M&A experts who have experience with maximizing SaaS exit outcomes.
Tips to Negotiate the Best SaaS Sale Deal
You should negotiate your deal tactfully to minimize the closing time.
Here are expert tips to do that:
Understand Your Buyer: Identify SaaS buyer types and position your business to align with their motivations and priorities. For example, for strategic buyers, you should focus on showcasing your complementary SaaS solutions or extended capabilities.
Develop a Compelling Narrative: Create a story that clearly communicates your product's value, what sets it apart, major accomplishments, and the challenges you've faced along the way. Also, narrate how the business is positioned to explore new opportunities.
Create Competitive Tension: Focus on attracting a large number of buyers to drive better terms, higher valuations, and more favorable terms.
Focus on Key SaaS Metrics: Base your negotiations on your core SaaS metrics, such as gross profit, ARR, and churn, to demonstrate scalable growth and secure favorable offers.
Consider Post-sale Support: Prepare a transition plan with a well-defined scope and timelines to position your SaaS business as less risky and make your offer more attractive.
Questions to Ask Before Selling a SaaS Company
We’ve rounded up the top 6 questions you should ask yourself to get the selling process started.
Check them out below:
Questions to Ask as a SaaS Founder
Explanations
What are my goals for this exit?
Establish your personal and financial goals to determine if the sale is well aligned.
Is it the right time to exit?
Understand when it’s time to sell your business by analyzing SaaS market activity, valuations for similar businesses, and when strategic and PE buyers are active.
How do I optimize my business for sale?
Assess if your SaaS business has strong company fundamentals, such as recurring revenue and strong retention.
Then focus on improving your SaaS multiples through strategies such as reducing the operating expenses and diversifying your customer base.
How much is my business worth?
Leverage a SaaS valuation calculator to understand your SaaS business value and maximize it before listing it for sale.
Should I go for an earn-out or offer seller financing?
Understand the different deal structures, their roles in the M&A transaction, your long-term interests, and the post-sale risks they entail.
What agreements do I need in the SaaS sale?
Work with an M&A attorney to prepare a non-disclosure agreement, sales agreement, and non-competition agreements to ensure your interests are protected.
Frequently Asked Questions (FAQs)
Below are the most commonly asked questions by SaaS business sellers:
What Valuation Multiples Do SaaS Companies Typically Receive?
Valuation multiples for SaaS companies vary based on size, profitability, the rule of 40, and growth potential.
Public SaaS companies with 40-60% year-on-year growth trade at approximately 6x to 10x, while private SaaS companies sell at multiples ranging from 4x to 7x ARR.
What Risks Should Founders Consider Before Selling a SaaS Business?
They include operational dependencies, high churn, unclear financial documentation, IP ownership issues, and technical debt.
What Role Does Profitability Play in SaaS Acquisition
Generally, profitability signals that your business has sustainable growth and commands premium valuation multiples.
As a founder, you should strive to achieve the Rule of 40, where your SaaS business's Revenue Growth + EBITDA Margin equals or exceeds 40%.
What Types of Buyers are Most Active In the SaaS Market?
Private Equity buyers dominated 58% of SaaS transactions. They are actively looking to acquire companies with strong recurring revenue to combine them.
They are followed by strategic buyers that accounted for 48% of deals. They aim to expand their offerings and market reach, and enhance their competitive position.
Conclusion
A valuable step in selling your software business is understanding the firms that buy SaaS businesses and the categories of SaaS buyers they are. You should also understand how your business fits into that ecosystem to support exit planning.
Given the complexity involved, it’s crucial to partner with M&A professionals who can provide guidance.
At Exitwise, we help you hire and manage your M&A team to help position and sell your business at maximum value. We connect you with M&A attorneys, tax advisors, and investment bankers to safeguard your interests.
Let Exitwise introduce, hire and manage the best, industry specialized, investment bankers, M&A attorneys, tax accountants and other M&A advisors to help you maximize the sale of your business.
