SaaS M&A Update – May 2025 | Trends and Deals

Executive Summary: The Canadian SaaS M&A Climate in May 2025

As of Q2 2025, the software M&A environment in Canada is recovering—and recalibrating. Deal volume is climbing. Strategic buyers are active again. Private equity firms are deploying aggressively into vertical and infrastructure SaaS. And valuations, while still selective, are showing renewed strength in high-efficiency, high-retention businesses.

Windsor Drake, Canada’s leading sell-side M&A advisor to private B2B SaaS companies, presents this in-depth market analysis for SaaS founders seeking clarity, confidence, and competitive advantage as they plan for a possible exit or recapitalization.

Market Momentum: Four Forces Reshaping SaaS M&A

1. Strategic Buyers Have Re-entered

After a slowdown across 2023–2024, publicly traded software acquirers are once again pursuing bolt-ons to supplement lackluster organic growth. Key focus areas include:

• Vertical SaaS solutions with embedded workflow ownership
• Horizontal tools expanding existing product ecosystems
• Mid-market companies ($3M–$20M ARR) with proven go-to-market repeatability

Large strategics are leveraging cash-heavy balance sheets to acquire defensible Canadian software assets. This trend is expected to continue into H2 2025.

2. Private Equity Still Dominates Volume

More than 60% of closed transactions under $100M CAD involve private equity buyers—either as new platform investments or bolt-ons. Windsor Drake has observed strong activity across:

• Construction tech
• Fintech (billing, payments, regtech)
• Legaltech and edtech
• B2B productivity tools with 80%+ gross margin

PE funds remain the most consistent and active SaaS buyers in the Canadian market.

3. AI-Native Platforms Creating a New Valuation Ceiling

Companies with embedded artificial intelligence capabilities are receiving substantial buyer attention and premium multiples—but only when backed by:

• Proprietary data
• Technical defensibility
• Demonstrable customer ROI

Conversely, SaaS platforms without true AI functionality or efficient distribution are seeing stagnant demand.

4. Canadian SaaS Is Gaining Cross-Border Attention

Canadian founders are fielding inbound interest from both U.S. and EU buyers, as valuations remain more favorable than in Silicon Valley and London. Founders with clean financials, U.S. revenue, and scalable infrastructure are drawing top-tier international acquirers.

Valuation Ranges and Metrics: May 2025 Benchmarks

Based on Windsor Drake’s closed transactions and ongoing mandates:

• <$3M ARR SaaS: 3.5x–6x ARR (must show profitability or very low churn)
• $3M–$10M ARR: 5x–9x ARR (high interest from PE-backed buyers)
• $10M+ ARR: 7x–11x ARR (if NDR > 110%, CAC payback < 12 months)

Buyers are particularly focused on:

• Gross margin over 85%
• Churn below 8% annually
• Rule of 40 benchmarks (growth + margin)

Founders should emphasize net revenue retention (NRR) and contribution margin as key levers in valuation discussions.

Structural Themes: How Deals Are Being Done

Across transactions under $100M CAD, the most common deal structures include:

• 80–90% cash at close
• 10–20% equity rollover or performance-based earnout
• Asset vs. share deals determined by tax structure and IP holding
• 6–12 month transition periods for key management/founders

Founders considering exits in the next 12–18 months should engage now to begin structuring toward these market-standard frameworks.

Notable Canadian M&A Activity in Q2 2025

Vertical SaaS

• Legal SaaS platform (Toronto-based) acquired by U.S. legaltech consolidator
• Construction cost-estimating tool acquired by PE-backed proptech group

Infrastructure SaaS

• Canadian DevOps and CI/CD company acquired by multinational cybersecurity firm
• Billing and payments software in healthcare sector closed Series B with growth equity and partial founder secondary

AI-Enabled Tools

• AI-powered revenue operations platform acquired for 9.2x ARR by U.S. public software company

These deals reflect buyer demand for Canadian teams with technical depth, high-margin operations, and repeatable growth.

Why Windsor Drake

Windsor Drake is Canada’s leading independent M&A advisory firm focused exclusively on selling private technology companies. Our SaaS team provides:

• Deep sector expertise in B2B and vertical SaaS
• Access to top global strategic and PE-backed buyers
• Institutional-grade materials, valuation modeling, and negotiation
• A founder-first approach to confidentiality and control

We advise SaaS companies with $2M–$30M ARR preparing for exit, recapitalization, or partial liquidity events. Our goal is to help founders maximize valuation while securing the right long-term partner.

Canadian Founder Considerations in 2025

• Tax: LCGE (Lifetime Capital Gains Exemption) remains a major planning opportunity. Early preparation with advisors is critical.
• IP and Data: Buyers are scrutinizing data compliance (PIPEDA, GDPR) and IP assignment. Ensure clean documentation.
• Team: Retention and option pool structure are key buyer priorities. Address employee equity and golden handcuffs early.

For CRA guidance on business sales and taxation, visit: https://www.canada.ca/en/revenue-agency/services/tax/businesses.html

FAQs

Is now a good time to sell a SaaS company in Canada?
Yes—buyer activity is strong, especially for businesses with clean metrics, efficient growth, and high retention.

How long does it take to close a deal?
6 to 9 months from initial engagement to closing.

Do buyers still offer strong valuations in 2025?
Yes, for capital-efficient businesses with clean metrics and clear category leadership.

Can Windsor Drake help if I don’t want to sell yet?
Absolutely. We work with founders 12–24 months before they go to market to optimize positioning and strategy.

Final Thought

If you’re a SaaS founder in Canada and considering a sale, recapitalization, or investor-led growth strategy, there has never been a better time to start the conversation. Strategic and financial buyers are actively deploying, and founders who prepare early are achieving premium outcomes.

Windsor Drake | Canada’s SaaS M&A Advisory Firm