Translink CF unveils Q3 2024 SaaS Valuation Index: Key insights into a dynamic M&A market

Unpacking the SaaS Market: Translink CF’s Valuation Index and M&A Insights

Translink Corporate Finance has released its SaaS Valuation Index for Q3 2024, providing an in-depth analysis of trends shaping the SaaS sector globally. The index includes 144 companies from Europe, the USA, and the rest of the world (RoW), with a focus on private small-to-mid-market B2B SaaS businesses in Europe, representing 58% of the sample.

Commenting on the findings, Marc Irisson, Partner & Head of TMT Group, noted, “The Translink CF SaaS Valuation Index for Q3 2024 reveals a dynamic market. While valuations have slowed for the first time in nine months, deal volumes remain robust, with Europe leading the charge. The divergence between outperformers and underperformers highlights the need for a nuanced approach to SaaS investments. As we monitor the post-election landscape in the US and await Q4 results, we remain optimistic about the sector’s M&A prospects in 2025.”

 Deal volume highlights

• Q3 2024 recorded 1,705 deals, a 13.82% year-on-year increase compared to Q3 2023 and significantly above the six-year quarterly average of 1,200 deals.
• Growth in volumes has been consistent, with 1,679 deals in Q2 FY 2024, rising to 1,705 deals in Q3 FY 2024 (+1.2%).

Other key take-outs

• First slowdown in revenue multiples:
  The median valuation for Q3 2024 has slowed to 3.3x NTM revenues, marking the first decline in nine months. For the past 15 months, valuations had remained stable in the 3.5x–4x range, indicating a significant shift compared to earlier periods.
• Market disparity:
  While the median valuation offers a baseline, the SaaS market is far from uniform. Premiums are being paid by private equity (PE) firms and strategic bidders for high-performing targets, which raises questions about whether the stock exchange accurately reflects the true value of small and mid-sized SaaS companies.
• Impact of US market uncertainty:
  Ahead of the November elections, the US SaaS market saw valuations drop to a median of 4.3x NTM revenues, the lowest in the index’s history. This underscores the uncertainty in the US market, with Q4 data anticipated to provide further insights.
• European dominance in deal volume:
  Europe led in deal flow, accompanied by a slight uptick in valuations to 2.9x NTM sales.
• RoW struggles:
  Valuations in the rest of the world (RoW) declined to a low of 3.1x NTM revenues, with deal volumes lagging. This region remains less attractive for investors in the current landscape.

Performance insights

• Outperformance premiums:
  SaaS companies with an R40 above 60 traded at an average premium of +314% compared to underperformers, a figure that has surged in recent quarters.
• Few outperformers, strong characteristics:
  Top performers this quarter achieved a median NTM EBITDA margin of 40.5%, demonstrating strong growth, reliability, and a clear vision for the future, attracting significant investor interest.

The SaaS Valuation Index continues to be a vital tool for industry stakeholders, offering granular insights into the evolving SaaS landscape. The Translink CF TMT team is committed to stewarding transactions from start to the finish line, leaning on our deep expertise and global footprint to get the deal done. For a detailed view, download the full index from Translink Corporate Finance.