Software M&A Trends for 2025: Insights from GLC Advisors

The high-flying times of 2021 are over, but it doesn’t mean you can’t be successful in software M&A. If you have a SaaS business performing well financially, you can still get funded and/or exit for nice ARR multiples.

I recently sat down with Jim Williams, Managing Director at GLC Advisors, to discuss the current state of software M&A and what we can expect in 2025. This is my 3^rd interview with Jim regarding the software M&A markets.

The key highlights are summarized below to get you up to speed on the latest in SaaS M&A. You can also catch the podcast version here and YouTube version here.

Introducing Jim Williams and GLC Advisors

Jim Williams leads the technology investment banking team at GLC Advisors, a boutique firm specializing in mid-market M&A. His team is focused on founder-led businesses, with a majority of their work on the sell-side. With decades of experience advising tech founders, Jim offers a unique perspective on the market.

Key Points:

• GLC Advisors focuses on founder-owned, mid-market software businesses, with 90% of their deals on the sell-side.
• Their expertise spans private equity-backed deals, strategic acquisitions, and alternative financing structures.

The firm tracks 1,000+ software M&A deals annually to deliver precise, data-driven insights.

Latest Trends in Software Deal Volume

After a rollercoaster ride in recent years, 2024 showed a 17–18% rebound in deal volume compared to 2023. While 2022 and 2023 were marked by sluggish deal activity, 2024 demonstrated encouraging momentum heading into 2025. This growth, though gradual, signals improving conditions for software M&A.

Key Points:

• 2024 saw a consistent 15–20% increase in deal volume compared to the prior year.
• The rebound in activity reflects improving buyer sentiment and stabilizing market conditions.
• Momentum is expected to be carried into 2025, making it an exciting time for founders to consider transactions.

Valuation Trends: What Founders Need to Know

Valuations have stabilized in the range of 4–5x total revenue, marking a return to pre-2020 norms. While the days of 6–8x multiples seen in 2021 are not as frequent, healthy, scalable businesses with strong SaaS metrics still command competitive valuations. I’d say the ballpark is still 3 to 10x, so don’t be discouraged, but it takes great metrics to push double digit mutliples.

Key Points:

• Valuations have returned to “normal” historical levels, averaging 4–5x total revenue.
• Premium multiples (6–10x) are achievable but require top-tier SaaS metrics and strong ARR growth.
• Subscription revenue models continue to dominate, with most software buyers prioritizing recurring revenue streams.

Buyer-Seller Dynamics: Closing the Expectation Gap

The valuation gap between buyers and sellers has narrowed significantly. In 2021, sellers often anchored on sky-high valuations, while buyers were more cautious. By 2024, a “healthy tension” emerged, with more deals closing as both sides adjusted valuation expectations.

Key Points:

• The “bid-ask spread” has evolved from a chasm to manageable negotiation differences.
• Time has normalized expectations, with buyers and sellers finding more common ground.
• Founders with clear financials and metrics are better positioned to command favorable terms.

Earnouts and Alternative Structures

Creative deal structures are more common in today’s market. While premium businesses often command all-cash offers, many deals now include earnouts or seller notes to bridge valuation gaps. These structures ensure alignment between buyers and sellers while providing founders additional upside.

Key Points:

• Earnouts are structured to align incentives and often reward founders for hitting achievable milestones.
• Seller notes and equity rollovers have become standard tools to close valuation gaps.
• Founders of premium businesses can still demand cleaner, all-cash deals if their financials are strong.

Credit Markets and Their Impact

The shift from near-zero to higher interest rates changed how deals are financed. Although debt markets tightened in 2023, private credit funds have stepped up, offering flexibility to mid-market buyers. For founders, this means a healthier, more predictable financing environment.

Key Points:

• Private credit funds are reshaping how mid-market deals are financed, adding flexibility for buyers.
• While interest rates remain elevated, financing availability has improved since 2023.
• Founders should ensure their businesses can withstand leverage-related scrutiny during the deal process.
  • Ben’s note: PE buyouts are typically “levered.” Meaning, it’s a mix of cash and debt to purchase your SaaS company. Your SaaS will need to cover the principal and interest from operating cash flows.

Is It a Buyer’s or Seller’s Market?

While 2023 was clearly a buyer’s market, 2024 ended with a more balanced environment. For standout businesses, scarcity value often tips the scales in favor of sellers, with buyers willing to pay a premium for high-quality assets.

Key Points:

• The market is balanced, but premium businesses can create a seller’s advantage.
• Buyers are focused on “A-grade” businesses due to the limited availability of quality assets.
• High-quality SaaS businesses continue to command competitive bidding, often leading to premium offers.

Due Diligence Timelines

Founders should plan for a 60-day due diligence period, though timelines can vary. Preparation is critical—clean financials, accurate SaaS metrics, and clear documentation are essential to avoiding delays and maintaining leverage during negotiations.

Key Points:

• Most due diligence processes take 45–75 days; preparation can shorten this timeline.
• Key preparation steps include clean revenue schedules, SaaS metrics, and customer data.
• Poor preparation can result in lost leverage, delayed closings, or even failed transactions.
• Ben’s note: you need at least six months to prepare your SaaS metrics. You need to be sure that all data sources and calculations are accurate. Let’s talk if you need help here.

Metrics That Matter in M&A

Key SaaS metrics are often the first thing buyers scrutinize. Founders should focus on:

• Gross Revenue Retention and Net Revenue Retention: Gross retention is now viewed as a critical indicator of customer base health.
• Gross Margin: Fully loaded gross margins help buyers assess scalability.
• Revenue Growth: 40%+ growth at scale is a benchmark for premium valuations.
• Customer Concentration: Diversification across customers is essential; no single customer should account for more than 20% of revenue.

Is a 10x ARR Valuation Still Possible?

The big question! Yes, but it requires hitting key benchmarks:

• $10M ARR (or close to it) with 40%+ growth.
• Best-in-class SaaS metrics (retention, gross margin, etc.).
  • Ben’s note: Implement my 5 Pillar SaaS Metrics Framework to understand how you compare to best-in-class benchmarks.
• TAM exceeding $1B.
• Profitability or a clear path to profitability. Measure your EBITDA!

Key Points:

• Growth is back in focus, with profitability still important but secondary to strong ARR growth.
• Companies at scale (7–10M ARR) have the best chances of commanding double-digit multiples.
• Premium valuations require aligning multiple factors: retention, scalability, TAM, and growth metrics.

What to Expect in 2025

Jim’s outlook for 2025 is optimistic. Deal volumes are expected to rise, particularly in the second half of the year. Private equity firms, armed with dry powder, are poised to make both platform and add-on acquisitions. Make sure you understand that difference.

While multiples are likely to remain steady, founders with strong growth trajectories and strong financial health will continue to attract premium offers.

Key Points:

• Private equity is expected to focus on platform deals, creating more opportunities for SaaS founders.
  • Ben’s note: A platform buy is when your product is the main offering. Add-on buys create features around your product.
• Multiples are unlikely to spike in 2025 but should remain stable with upward potential.
• Founders should consider beginning preparation in 2025, even if planning an exit in 2026 or later.
  • Ben’s note: Prepare your data. Do not rush into a process. I can help you here.

Final Thoughts

For SaaS founders, 2025 presents an interesting moment to explore the M&A market. Whether you’re considering an exit or preparing for future opportunities, aligning your metrics, refining your financials (make sure you have SaaSified your accounting and SaaS P&L), and understanding buyer expectations will be key to maximizing value.

Have questions about preparing for M&A or improving your SaaS metrics?

Many thanks to Jim Williams for sharing his insights and expertise. You can connect with Jim here.