Translink Corporate Finance has published its updated SaaS Valuation Index for Q2 2024. It confirms the sustained interest and growth in the SaaS sector observed over the past months, with stable valuations marking the quarter.
Key Highlights:
- Deal Volume: Q2 2024 witnessed 1 687 deals completed, a slight year-on-year decrease of 10.9% from over 1 894 deals in Q2 2023. However, deal volume has continued to grow quarter over quarter for the past nine months, surpassing the six-year average of approximately 1 200 deals per quarter.
- Valuations: Median valuations have stabilised at 3.6x NTM (Next Twelve Months) revenues, within the consistent range of 3.5x to 4x NTM revenues observed for over a year. This stability has fostered a higher deal volume.
Market Outlook:
The Translink CF team remains optimistic about the second half of 2024, expecting deal volumes to remain stable and valuations to stay close to a median of 4x NTM revenues. As we update our index for 2024, our goal remains to provide small and mid-size SaaS company owners with relevant information for assessing their business value.
Additional Insights:
- Stabilised Revenue Multiple: The revenue multiple for small/mid-market SaaS companies showed signs of stabilisation, with a median of 3.6x NTM revenue in Q2 2024, similar to Q1 2024.
- Premiums for Top Performers: Private Equity and strategic bidders are paying strong premiums for high-performing targets. In Q2 2024, SaaS companies with an R40 above 60 traded at an average premium of +200% compared to underperformers, consistent with Q1 2024.
- Regional Market Trends:
- The US market still shows no signs of a strong rally on valuations, with the Index’s sample companies trading at a median of around c.5x NTM revenues for the past 18 months. Deal volume still trails Europe, despite increasing. The median multiple in Q2 settled at 4.7x NTM sales.
- The European market leads in deal volumes, supported by stable valuations slightly below 3x NTM sales.
- The RoW market has seen decreasing valuations to a low of 3.1x NTM revenues, with lower deal volumes and a delayed recovery.
Over the past 24 months, underperformers’ valuations have declined from 5.3x to 2.7x, while performers’ valuations have remained stable at around 5x, with top performers seeing an increase from 6.1x to 8.1x. The best-performing companies are leveraging their reliability and future vision to attract investors.
The SaaS sector continues to demonstrate robust investor interest and stability, making it a promising area for continued growth and investment. With deep expertise and a global footprint, Translink advisers get the deal done in the SaaS sector.
