Acquisition multiples for SaaS companies

searcher profile

October 02, 2017

by a searcher from Harvard University - Harvard Business School in Minneapolis, MN, USA

Does anyone have data points on acquisition multiples for small (i.e. sub-$3M EBITDA) SaaS companies?

The public multiples I've come across are pretty rich (see picture), but that's to be expected. I've heard of one search fund acquisition of a smaller SaaS business management company that was 6.5x EBITDA and 2x revenue. I'd love to hear what others have seen.


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commentor profile
Reply by an investor
from INSEAD in Amsterdam, Netherlands
Check out Constellation Software - http://www.csisoftware.com - they are a serial acquirer of niche vertical software companies (did###-###-#### deals). Look through their investor relations section first to look for their acquisition multiples. You may want to look up on the web if there are some freely availbale broker reports - they should comprehensively cover your questions. I reacall (verify yourself please) that their typical deal size has been 5-10 $ m. They were acquiring targets at end of 2015 at###-###-#### EV/ Sales. Average EBITDA margin was 20-25%. That indicates EV/ EBITDA multiple of 4-6X. There has been constant inflation of acquisition multiples over last years (EV/Sales increased from 0,6x in 2012 to 1,2X at the end of###-###-#### there is increasing competition for these targets driving valuations up. So given inflation, valuations could be in the range of 5-7X (just an educated guess).
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Reply by a searcher
from INSEAD in Paris, France
Two of the SaaS brokers I came across claim that their ranges are 3x to 5x of SDE (Seller Discretionary Earnings) depending on several qualitative criteria. Check out: https://feinternational.com/blog/saas-metrics-how-to-value-saas-business/ and https://centurica.com/website-buyers-report/
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