SaaS deal activity surges 25.9% in 2024, setting the stage for AI-driven 2025
Total SaaS deals in 2024 reached 6 691, a 25.9% increase from 5 312 deals in 2023 – making it the second-highest year for deal activity in the past six years. The Q4 2024 findings from Translink Corporate Finance confirm continued investor interest in SaaS, with 1 608 deals completed in the quarter, up 3.86% year-on-year.
Q4 2024 highlights: Stability at high volumes
- Deal count: 1 608 SaaS deals completed in Q4, maintaining strong momentum.
- Median valuation: 3.3x Next Twelve Months (NTM) revenue, stable from Q3.
- European market leadership: Europe led in deal volume, with valuations rising to 3.1x NTM revenues- the highest in over a year.
- U.S. market trends: Uncertainty surrounding the November Presidential election kept valuations in check, despite expectations of a positive outlook for tech.
- Rest of World (RoW): Valuations declined to 3.0x NTM revenues, a six-year low, amid lower deal volumes.
2024 takeaways: Growth, profitability, and market consolidation
The SaaS sector remains highly attractive, but growth at all costs is no longer the norm. While premium valuations continue for outperformers, overall market conditions have become more selective. Companies achieving an R40 score above 60 commanded a +396% valuation premium compared to underperformers – marking the highest premium recorded since the index began.
- Profitability focus: The best performers in Q4 achieved a median NTM EBITDA margin of 38.1%, with anticipated revenue growth of 31.7%.
- Strategic buyers hold steady: They accounted for 53% of deals, in line with previous years.
- Key market drivers: SaaS remains buoyed by digitisation, cloud adoption, and the AI revolution.
2025 Outlook: AI to drive SaaS performance and M&A
The coming year is expected to see AI-driven performance differentiation across the SaaS sector. As AI-powered SaaS solutions mature, companies leveraging AI effectively will likely see stronger profitability, growth, and Rule of 40 metrics, further polarising the market.
- AI M&A acceleration: SME SaaS acquisitions in AI are expected to increase as leaders pull ahead and laggards rush to catch up.
- Premiums for high-performers: Companies demonstrating robust R40 metrics will continue to command higher valuations.
- U.S. market rebound expected: With a new administration in place, a resurgence in deal activity and valuations is anticipated.
Translink Corporate Finance’s SaaS Valuation Index remains a key benchmark for private small-to-mid-market B2B SaaS companies in Europe, with 144 listed SaaS companies globally. The Q4 2024 report underscores the sector’s resilience and evolving dynamics as it enters an AI-driven era.
With decades of global expertise and deep sector knowledge from being involved in more than 30 SaaS deals over the past 24 months, Translink Corporate Finance is a trusted partner for SaaS businesses navigating valuations, M&A, and investment strategies. Our specialists provide tailored insights and hands-on support to help companies maximise their value in an evolving market.