We found that more than half of SaaS companies with $1-$10 million ARR were acquired at 2.0x to 5.

0x EV/Revenue multiple

Distribution of number of M&A deals by revenue multiple Key findings

Multiple Sample (n)

Median
1st quartile Median
3rd • In our sample of 118 SaaS deals with the
revenue quartile target revenue between $1 to $10 million,
the median EV/Revenue multiple paid
EV/Revenue 118 $4.0M 2.6x 4.2x 6.9x was 4.2x

• Around 50% of all SaaS companies in our

sample were acquired for 2.0x to 5.0x
revenue multiple

• The highest number of deals fall within the

2.0x to 3.0x bucket (22 deals) and the 3.0x
to 4.0x bucket (21 deals)

• The distribution exhibits a long tail towards

the higher end of the multiples, with a
noticeable number of deals occurring at
multiples above 20.0x revenue

Note: sample of 118 SaaS M&A transactions with reported multiples over 2015-2024

Source: Mergermarket 3
One-third of SaaS companies with $10-$50 million ARR were acquired above 7.0x EV/Revenue multiple

Distribution of number of M&A deals by revenue multiple Key findings

Multiple Sample (n)

Median
1st quartile Median
3rd • In our sample, the median EV/Revenue
revenue quartile multiple was 4.5x for SaaS M&A deals in
the $10-50 million ARR range
EV/Revenue 108 $21.3M 2.0x 4.5x 8.5x
• The most common revenue multiple range
for deals in $10-50 million ARR is between
3.0x and 6.0x revenue

• Quite surprisingly, the overall distribution is

skewed towards the lower multiples due to
13 deals that happened below 1.0x multiple

• These deals may have involved distressed

SaaS companies facing challenges like
stagnant growth, high churn, low margins, or
other operational issues. Acquirers likely
paid discounted multiples reflecting the
perceived risks and turnaround efforts

• These could have been asset deals rather

than traditional revenue-based SaaS deals

• In only 30% of the SaaS deals below 1.0x,

the target was from the USA while the rest
were majorly European deals

Note: sample of 108 SaaS M&A transactions with reported multiples over 2015-2024

Source: Mergermarket 4
Following the rapid growth and decline of multiples during 2020-2022, the median multiples for smaller SaaS firms are now below average

Median revenue multiple, 2018-2024 Key findings

Median • The revenue multiples have shown

significant volatility in the 2018-2024 period
8.0x driven by a global pandemic, changing
interest regimes, and overall market
7.1x environment
7.0x
• The median EV/Revenue multiple peaked at
7.1x in 2021 driven by loose monetary policy
6.0x 5.9x and optimism towards SaaS business
models
5.0x
• SaaS revenue multiples declined sharply
4.3x through 2022 and 2023, dropping below 3x
4.0x by the end of 2023
2018-2024 median = 3.5x
• As of March 2024, median EV/Revenue
3.0x 2.5x multiple is 2.5x, which is lower than the
2.7x 2018-2024 median of 3.5x
2.6x
2.0x
Sample statistics (n=65)

1.0x Median revenue $5.7M

Median revenue growth 17%

0.0x
2018 2019 2020 2021 2022 2023 2024 Median EBITDA margin -32%

Note: sample of 65 listed SaaS companies across the developed markets with LTM revenue of $1-10M

Source: S&P Capital IQ 6

SaaS companies in the $10-50M ARR category fare better in terms of profitability but current revenue multiples are below long-term average

Median revenue multiple, 2018-2024 Key findings

• The median revenue multiple for the sample

5.0x of 32 companies fluctuated significantly,
peaking at around 4.3x in 2021 and
4.5x declining to around 2.1x by 2024
4.3x
• The median profitability of $10-50M ARR
4.0x SaaS businesses is better than their $1-10M
ARR peers (0% Vs -32%).Nonetheless,
3.5x positive profitability remains a challenge
3.1x 3.3x
3.0x • As of March 2024, median EV/Revenue
multiple is 2.1x, which is lower than the
2018-2024 median = 2.3x 2018-2024 median of 2.3x
2.5x
• Overall, valuation multiples are more
2.0x 2.3x grounded compared to the 2021-22 peak
2.2x due to factors such as high interest rates,
2.1x
1.8x muted investor activity, and a correction in
1.5x
SaaS valuations form inflated levels
1.0x Sample statistics (n=32)

0.5x Median revenue $24.2M

Median revenue growth 11%

0.0x
2018 2019 2020 2021 2022 2023 2024 Median EBITDA margin 0%

Note: sample of 32 listed SaaS companies across the developed markets with LTM revenue of $10-50M

Source: S&P Capital IQ 7

Median metrics Listed SaaS companies: Q4 2023 vs. Q3 2023

EV/Revenue x 7.1x -0.3x

Revenue growth % 17% -1pp

EBITDA margin % 7% +3pp

Net profit margin % -1% -1pp

Rule of 40 % 24% +2pp

9
SaaS index rebounded in 2023, but is still very far from its peak in 2021

SaaS Index, 01.01.2015=100 Comment

No. of companies Index • Index of SaaS companies has been slowly

growing in the 2015-2020 period driven by
800 769 300 the expanding valuation multiples, as well as
by rapid growth of the companies.
700
250 • After the unprecedented monetary and fiscal
stimulus and COVID digitalization tailwinds,

No. of companies in the Index

600 the index jumped in 2020 to over 600 points
by early 2021.
200
500 • After the investor sentiment changed,
422 interest rates grew and profitability came
Index

400 150 back to focus, investors rushed to sell SaaS

companies, especially the ones with no
profits.
300 363
304 100
Peak IPO activity at IPO market freeze
200 the top of the bubble Q1 2024 update
50 • Aventis SaaS Index rose by 14% between
100
Q3 2023 to Q4 2023.

0 0 • The index is up roughly 3% in the first two

2019-07
2019-10
2015-01
2015-04
2015-07
2015-10
2016-01
2016-04
2016-07
2016-10
2017-01
2017-04
2017-07
2017-10
2018-01
2018-04
2018-07
2018-10
2019-01
2019-04

2020-01
2020-04
2020-07
2020-10
2021-01
2021-04
2021-07
2021-10
2022-01
2022-04
2022-07
2022-10
2023-01
2023-04
2023-07
2023-10
2024-01
months of 2024

Note: equal-weight index; 01.01.2015=100; IPO date=100 for companies that went public after 01.01.2015

Source: S&P Capital IQ, as of 12 January 2024 10

EV/Revenue multiples for listed SaaS businesses stagnate at around 7.0x with much of the stock price increase coming from larger revenue

Median EV/Revenue multiple, 2015-2024 Comment

1st and 3rd Quartile Median • Revenue multiples have been growing
slowly between 2015-2019, reaching a
35.0x median of 13.6x before the COVID drop.

• Market drop in March 2020 was short lived,

30.0x with the multiples quickly recovering.

• Many SaaS companies went public during

25.0x the peak of the valuations, with the 25%
highest valued companies trading at above
30x Revenue.
20.0x • The highest multiple recorded in our sample
was Asana, closing at 89.0x LTM Revenue
in November 2021.
15.0x

10.0x 7.2x Q1 2024 update

6.8x
• The median EV/Revenue multiple was 7.2x
5.0x for companies in the Aventis SaaS Index as
of 29 Feb 2024

0.0x
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

Source: S&P Capital IQ as of 12 January 2024, not all companies in the index have reported earnings for Q4 2023 at the time of publishing 11
SaaS revenue growth rates continued to deteriorate reaching a median of 18% in the past two quarters

Median YoY quarterly revenue growth, % Comment

40%
Median • SaaS growth rates have been slowly
decelerating over the past nine years, as
many companies reached scale.
35%
36%
34%33%
35%
34% • By Q2 2020, the median growth rate of
34%33%
32% 33% SaaS business declined to 23% YoY.
30% 32% 32%
31% 31% 30%
30% 30%
29% 29%
30% 29%29%
30%
29% • Pandemic provided a temporarily relief,
29%
28% 28% pulling forward the demand for software and
25%
26%
accelerating the growth by 11pp.
25%
23% 23% • After peaking in Q2 2021, the growth rates
23%
20% are slowly returning to the long-term
20%20% trendline and may even overshoot to the
18%18% downside in case of a major recession.
15% 17%

10% Q1 2024 update

• QoQ, the median revenue growth dropped

slightly to 17% for companies in the Aventis
5%
SaaS Index.This is still way below pre-
pandemic levels.
0%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 2023

Source: S&P Capital IQ

After large layoffs signaling cost control and focus on efficiency, profitability margins of SaaS companies have moved towards positive territory

Median quarterly margin, % Comment

Net Income Margin EBITDA Margin • Over the 2015-2022 period, a median SaaS
7% company lost money on both Net Income
and EBITDA margin basis.
5% 4%
• Following the margin increase in 2016-2019,
2% SaaS margins deteriorated again as the
1% 1% 1% companies invested in growth aggressively.
0% 0%
0% -1% -1% -1%
• While many companies report positive FCF
-2% -2% -2% -2%
-3% -3% -3% -1% -3% -3% -3% margins, it commonly includes the add-back
-3%
-4% -4% of stock-based compensation.
-5% -5% -5% -5% -5% -5%
-5% -6% -6% -5% • Focusing on efficiency in 2022-2023 has
-7% -6% -7% -7% brought some improvement in margins, yet
-8% -6% -8%
-9%
-8% -8% the median margins are still below zero as of
-10% -10% -10% Q1 2023
-9% -9%
-10% -11% -11% -11%
-10% -10%
-11% -13%
-12% Q1 2024 update
-12%
-13% -13%
-15% -14% • SaaS profitability margins have advanced
towards positive territory in last three
-16%
quarters. Companies in Aventis SaaS Index
touched an all-time high median EBITDA
margin at +7% however median net income
-20%
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 margin dipped slightly to –1%
2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 2023

Source: S&P Capital IQ 13

Rule of 40 metric for SaaS companies have been slowly declining over the past nine years

Rule of 40, % Comment

• Rule of 40 for a median SaaS company,

% above 40 Median calculated as sum of revenue growth and
35%
33% 33% 33% 100% EBITDA margin, has been slowly declining
31% 31%31% 31% since 2015.
31%30%31%30%
30% 30% 29% 30%30% 30% 90%
29%
30% 28% 29%
28%
• The median Rule of 40 metric declined from
27% 27% 80% around 30% in 2015 to around 20% in 2023.
26% 25%
24%
25% 70%
22% 22% 22%
21% 21% 21% 21%
20% 20% 60%
20%
17%
50%
15%
40%

10% 30%
Q1 2024 update
41%
36%
20%
35% 35% 33% 32%
5% 25%
23% 22%
26% 26%
22%
25% 24% 24% 23%
• The number of companies in the index that
17%
20% 20% 21%
19%
21% 20%
16%
18% 17% 17% 17%
10% surpassed Rule of 40 score rose from 9% to
15% 15% 14%
12% 13% 13% 12%
9%
17% QoQ while the median Rule of 40
0% 0% score increased by 200 basis points to 24%

Source: S&P Capital IQ 14

Very few companies are satisfying Rule of 40, primarily due to failing to improve profitability

Profit margin vs. Revenue growth, % As of Q4 2023 Comments

80% • Among 73 companies in our sample, only a

couple stayed above Rule of 40 as of Q4
2023.

• As of Q4 2023, the companies comfortably

60% above Rule of 40 included Adobe, Paycom,
and Descartes Systems.

• Rule of 40 implies a one-to-one tradeoff

between a percentage point of revenue
40% growth and margin.
Revenue growth

20%

Q1 2024 update

0%
• Most companies still fail to meet the Rule of
-50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 40 score. Out of 73 SaaS companies in our
index, 62 companies had a Rule of 40 score
below 40.

-20%
Profit margin

Source: S&P Capital IQ

A 10-point improvement in Rule of 40 metric is generally corresponding to a 1.4x revenue multiple growth

Revenue multiple vs Rule of 40 Comments

• Rule of 40 remains a good predictor of a

24.0x company’s valuation multiples.

• Using the latest available data from 18

21.0x March 2024, a 10% increase in Rule of 40
metric added 1.4x to the Revenue multiple.
18.0x
• A company with a zero Rule of 40 metric is
expected to trade at around 4.8x Revenue.
Revenue multiple

15.0x
y = 14.47x + 4.8554 • It is true that a higher Rule of 40 score
generally corresponds to a higher valuation
12.0x multiple, but this can be influenced by
company specific factors that also need to
be considered.
9.0x

6.0x
Q1 2024 update

3.0x • The relationship between Rule of 40 score

and EV/Revenue multiple remains the same
QoQ. However, we noticed that in Q4 2023,
0.0x a 10% increase in Rule of 40 score adds
-20% -10% 0% 10% 20% 30% 40% 50% 60% 70% 1.4x to the Revenue multiple Vs 0.6x in Q3
Rule of 40 2023.

Source: S&P Capital IQ 16

Since 2015, SaaS companies have had median EV/Revenue of 5.0x and EV/EBITDA of 22.4x

Multiple (2015-2024) Sample (n) Median deal size 1st quartile Median 3rd quartile

EV/Revenue 398 $64M 2.6x 5.0x 9.1x

EV/EBITDA 151 $101M 12.9x 22.4x 46.8x

Search criteria:
Industry is Computer Software; Software as a Service (SaaS)
targets selected
Deal value and multiples are disclosed
Period: 01.01.2015 – 29.02.2024
N=398 transactions

Source: Mergermarket 18
The EV/Revenue multiple for SaaS companies in the sample fluctuated within a range of 3.3x to 6.4x over the past 10 years

Median EV/Revenue multiple, 2015-2024 (n=398) Median EV/EBITDA multiple, 2015-2024 (n=151)

16.0x 1st and 3rd Quartile Median 100.0x 1st and 3rd Quartile Median

90.0x
14.0x
80.0x
12.0x
70.0x
10.0x
60.0x

8.0x 50.0x
6.4x
5.8x 5.6x 5.8x 5.7x 40.0x 33.9x
6.0x
4.8x 27.9x 29.1x
3.9x 3.9x 3.3x 30.0x 24.7x
4.0x 19.9x 20.6x
20.0x 16.7x
14.5x 14.7x
2.0x
10.0x

0.0x 0.0x
2015 2016 2017 2018 2019 2020 2021 2022 2023 2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Mergermarket 19
Deals above $50M have significantly higher valuations than smaller deals

Median EV/Revenue multiple by deal size, 2015-2024 Key findings

20.0x • The EV/Revenue multiple for acquired SaaS

1st and 3rd quart. Median companies tends to increase with the size of
the company.
18.0x
• The gap between the 1st and 3rd quartile of
16.0x the EV/Revenue multiple widens as the size
of the company increases.
14.0x
• Larger deals include strategic acquirers,
take-private transactions, yet the elevated
12.0x competition for such deals is also a major
factor.
10.0x
• The sample size for the “$0-5M" size
8.0x category is smaller and the companies in
6.9x this group may have elevated multiples due
6.3x
5.5x to lower absolute revenue size.
6.0x
3.9x
4.0x 3.3x 3.4x

2.0x

0.0x
$0-5M $5-20M $20-50M $50-100M $100-500M $500+

Source: Mergermarket 20
The EV/Revenue multiple for SaaS companies is generally higher than for Non-SaaS, but the premium has decreased in the recent years

SaaS vs Non-SaaS software, EV/Revenue multiple Key findings

Premium SaaS Non-SaaS software • In the sample analyzed, SaaS companies

had consistently higher EV/Revenue ratios
7.0x than other types of software companies.
6.4x
• The “SaaS premium” stayed elevated in the
6.0x 5.8x 5.8x 5.7x 2015-2020 period but has since declined.
5.6x
• We believe the increased competitiveness of
5.0x 4.8x investors for any software deals, as well as
5.3x ongoing transition to the cloud contributed to
its decline.
3.9x 3.9x 4.7x
4.0x
3.3x
3.6x
3.0x 3.3x 3.3x
3.1x
2.8x
2.0x 2.5x

81% Small
1.0x 61% 76%
56% 45% sample
39%
21% 21% size
0.0x
2015 2016 2017 2018 2019 2020 2021 2022 2023

Source: Mergermarket 21
US SaaS companies made up the majority of acquisitions in the sample and had the highest valuations and deal sizes

Country of Target Company Number of deals Median size, m USD Median EV/Revenue Median EV/EBITDA
USA​ 154 300 5.8x 31.7x

United Kingdom​ 45 34 4.7x 16.0x

Norway​ 23 27 5.4x 21.3x

Australia 17 58 5.5x 9.1x

Canada​ 13 75 5.4x 56.5x

France​ 14 45 3.0x 15.1x

Other 132 10 3.4x 21.1x

Total​ 398 45 5.0x 22.4x

Source: Mergermarket 22
We advise founders of technology and growth companies
on company exits and strategy.
Our focus sectors are Software and IT Services.
Our job is to make sure you sell at the right time to the
right people for the best valuation.

Technology M&A focus

Warsaw & New York

Cross-border expertise

Thought leadership

23
marcin.majewski@aventis-advisors.com

filip.drazdou@aventis-advisors.com

24