Software and SaaS valuations

February 15, 2023 – Stifel IRIS is pleased to release “Software and SaaS valuations: When quality matters more than ever” – an in-depth analysis of the recent correction in SaaS valuations and its impact on M&A transactions, IPOs and private fundings.

SaaS valuations have been corrected beyond the necessary. In the US, listed SaaS players now incur a discount on sales multiples versus the broader software sector. This comes despite continued healthy revenue growth rates and the general resilience of the subscription model in economic downturns. On the other hand, 2022 was a record year in terms of software M&A. While bear stock markets have made strategic acquirers more cautious in their M&A ambitions, the number of deals initiated by private equity funds has surged, and M&A multiples paid have not seen the same correction as those of listed players. Finally, the rare recent SaaS IPOs have not obtained the valuation they deserved, making it more difficult for private equity and venture capital funds to IPO their SaaS holdings, and funds raised by unlisted SaaS vendors have plummeted in value. However, if fundings above USD200m disappears, the market for fundings below USD200m on SaaS companies can recover.

Stifel IRIS’slatest white paper reviews the valuation opportunities in the software sector, as well as challenges for software vendors migrating to SaaS and subscriptions. Read this report to learn about the key trends that will shape the software market, and understand why we consider the currently low valuation multiples in the software industry provide further opportunities for M&A and fundings. Contact your Bryan Garnier representative if you would like to speak to the author, Gregory Ramirez.