Sell-Side M&A in Tech: What Buyers Are Acquiring Today
Headlines about technology M&A tend to fixate on averages. Median multiples have compressed. Deal volume is up or down. The market is hot or cold. These narratives make for convenient shorthand, but they obscure what actually matters to a founder preparing to sell: what will a buyer pay for your business?
The honest answer is that no index can tell you. Every transaction we see is shaped by factors that aggregate data cannot capture: the specific strategic logic driving the acquirer, the competitive dynamics of your vertical, the quality of your revenue, and the process through which you engage buyers. Two businesses with identical ARR and growth rates can achieve wildly different outcomes depending on these variables.
What we can say, with confidence, is that the buyers active in today's market have become more sophisticated and more selective. They are not buying growth for its own sake. They are underwriting specific characteristics that reduce risk and increase the probability of a successful integration. Understanding what those characteristics are, and whether your business possesses them, is more useful than tracking public market indices.
The Spread Matters More Than the Average
When founders ask about "market multiples," they typically have in mind a single number that represents what buyers are paying. The reality is far messier.
According to Software Equity Group's analysis, median SaaS M&A valuations in Q3 2025 stood at 4.1x revenue, with an average of 5.4x. That range alone, from 4x to 5x, represents a 25% swing in enterprise value for a business with $10M ARR. But the true spread is far wider. The same report notes that high-performing SaaS businesses achieved outlier valuations: CyberArk at 22x, Nozomi Networks at 12.7x, SlashNext at 10x.
Meanwhile, SaaS Capital's research shows that the bottom 10 companies in their index trade at a median multiple of 1.9x, while bootstrapped private companies average 4.8x and equity-backed companies average 5.3x. The gap between the weakest and strongest performers is not a few percentage points; it is a factor of ten or more.
This dispersion is the story, not the average. A founder with a disciplined, profitable business and strong retention is not competing against the median. They are competing for the attention of buyers who will pay premium prices for the right assets.
What Buyers Are Actually Underwriting
In conversations with acquirers, both strategic and financial, we see consistent patterns in what drives conviction and what triggers concern. These patterns are not about chasing metrics for their own sake. They reflect the fundamental question every buyer asks: how confident can we be that this revenue will persist and grow after we own it?
Revenue Quality Over Revenue Quantity
Net Revenue Retention has become the single most scrutinised metric in SaaS diligence. Software Equity Group reports that companies with NRR above 120% trade at a 63% premium over the market median. More strikingly, 56% of companies with retention above 120% trade in the upper quartile of valuations, and over 80% trade above the median entirely.
The inverse is equally telling. Companies with NRR below 100%, meaning their existing customers are shrinking rather than expanding, received a median multiple of just 3.1x, a 46% discount to the index median. This is not a minor penalty; it is the difference between a life-changing exit and a disappointing outcome.
Why does retention carry such weight? Because it is the purest signal of product-market fit. High retention means customers find the product essential. It means pricing power. It means the buyer can model future cash flows with greater confidence. A business with 120% NRR can afford to slow new customer acquisition and still grow revenue. A business with 90% NRR is running on a treadmill, burning cash on sales and marketing just to stand still.
Efficiency, Not Just Growth
The era of growth at all costs is over, at least for now. With the cost of capital no longer near zero, buyers are looking for businesses that balance expansion with profitability. The Rule of 40, which adds growth rate to profit margin, remains a useful heuristic, but the composition of that 40 has shifted.
A company growing at 50% with negative 10% margins (Rule of 40 score: 40) is viewed very differently today than a company growing at 25% with 20% margins (also 40). Buyers favour the latter profile because it demonstrates operational discipline and reduces the risk that the business will require additional capital post-acquisition.
McKinsey's M&A research reinforces this point: the most successful acquirers pursue M&A programmatically, making multiple smaller acquisitions rather than betting on a single transformative deal. This approach, they note, delivers median excess total shareholder return of 2.3% per annum. Programmatic acquirers are looking for assets that slot cleanly into their portfolio, not fixer-uppers that will consume management attention.
Defensibility and Differentiation
The AI narrative has complicated this picture. On one hand, Bain & Company reports that tech M&A is up by more than 75%, propelled by AI-related assets, with almost half of strategic technology deal value for transactions above $500M coming from AI natives or deals citing AI benefits.
On the other hand, buyers have grown wary. The same Bain research notes that one in five strategic dealmakers walked away from a transaction because of the anticipated impact of AI on the target's business model. What they fear is commoditisation: software that simply wraps a generic large language model and offers no proprietary data, workflow integration, or switching costs.
Buyers are acquiring defensibility, not features. They want businesses with proprietary data assets that improve with usage. They want deep workflow integration that makes the product difficult to rip out. They want domain expertise codified into algorithms that a generalist model cannot replicate. A product that could be rebuilt by a strategic acquirer's engineering team in six months is not an acquisition target; it is a build-versus-buy calculation that rarely favours the seller.
The Premium is Real
One of the most persistent myths we encounter is that "market conditions" impose a ceiling on valuations. Founders read headlines about compressed multiples and conclude that now is a bad time to sell, or that their business cannot achieve a premium outcome in the current environment.
The data tells a different story. Even in a market where the median multiple is 4x-5x, exceptional businesses are transacting at 10x, 15x, or higher. Software Equity Group's Q3 2025 report shows SaaS M&A hitting a record 746 transactions in a single quarter, extending a streak of 600-plus deals. The market is not closed; it is selective.
What creates premium outcomes? In our experience, it is a combination of factors that no single metric captures:
- Strategic fit with the buyer's thesis. A business that fills a specific gap in an acquirer's product suite or customer base will command a premium over one that is merely "interesting."
- Process quality. Running a competitive process with multiple qualified buyers creates leverage. A sole-sourced deal rarely achieves the same outcome as one with genuine competitive tension.
- Preparation. Buyers penalise uncertainty. A clean data room, clear financials, documented processes, and a management team that can articulate the business without the founder all reduce perceived risk.
- Timing. Selling into strength, when metrics are improving and the story is compelling, produces better outcomes than waiting for a crisis to force a transaction.
What the Macro Environment Actually Means
We would be remiss not to acknowledge that broader conditions do influence M&A activity. McKinsey notes that global deal value in 2024 reached $3.4 trillion, up 12% from the prior year, with some $7.5 trillion in cash sitting on nonfinancial corporate balance sheets. Private equity dry powder exceeds $2 trillion globally. The capital is there.
What has changed is how that capital is deployed. Average PE exit hold times have reached 8.5 years, more than double the 4.1 years seen in 2007. Financial sponsors are being more disciplined, holding assets longer, and requiring greater conviction before deploying. This is not a sign of a broken market; it is a sign of a mature one.
For founders, the implication is straightforward: the bar for quality has risen, but the rewards for clearing it remain substantial. Buyers are not absent; they are simply more selective. A business that would have attracted interest on growth alone in 2021 now needs to demonstrate retention, efficiency, and defensibility. But a business that demonstrates all three will find eager buyers willing to pay.
Practical Steps for Founders
If you are 12 to 36 months from a potential exit, the work begins now. Not in dressing up metrics for a sale process, but in genuinely improving the business in ways that buyers will value.
Start by auditing your retention. If your NRR is below 100%, understand why. Is it pricing? Product gaps? Customer success failures? Fixing a leaky bucket is more valuable than pouring more leads into the top of the funnel.
Examine your unit economics. If CAC payback exceeds 18 months, buyers will assume capital is being deployed inefficiently. If gross margins are below 70%, they will question scalability. These are not vanity metrics; they are the numbers buyers will stress-test in diligence.
Reduce key-person dependency. In the mid-market, acquirers are concerned that the business resides in the founder's head. Document processes. Build a management layer that can operate without you. A business that runs independently commands a premium because it reduces integration risk.
Finally, be realistic about your defensibility. If your core value proposition could be replicated by a well-funded competitor in six months, that is a strategic vulnerability, not just a diligence issue. Address it before you go to market, or be prepared to explain why it is less of a risk than it appears.
The View From Here
The M&A market has not frozen. It has sobered. The buyers active today are sophisticated, data-driven, and focused on long-term value rather than speculative growth. For the prepared founder, this is actually favourable. It means that genuine business quality is being recognised and rewarded, rather than momentum and narrative alone.
Market averages will continue to fluctuate with interest rates, public market sentiment, and geopolitical uncertainty. But these forces affect the median, not the ceiling. A strong business with excellent retention, efficient growth, and genuine differentiation will find buyers willing to pay premium prices, regardless of what the indices say.
If you are considering an exit and would value a candid conversation about how your business aligns with current buyer expectations, get in touch with our team.