Market IntelligenceWindsor DrakeUpdated October 21, 2026
By Jeff Barrington, Managing Director
In brief
Software M&A is running near record volume in 2026. Kroll’s August 2026 update put first-half deal volume on pace for about 2,672 transactions, which would be the second highest count on record, with annualized value near $240 billion and a 6.0x median EV/LTM revenue multiple on strategic deals. Software Equity Group counted 698 SaaS deals in Q2 2026 at a 4.0x median. The Federal Reserve raised its target range to 3.75% to 4.00% on September 16, 2026.
Technology M&A reached approximately $1.08 trillion in 2025, up 66% year-over-year. SaaS deal volume hit record levels. AI-related transactions accounted for nearly three-quarters of all tech deals by value. The first half of 2026 broadened the run: global M&A reached $2.8 trillion announced, up 48% year over year and the strongest first half since records began in 1980, with technology contributing $649 billion, per LSEG data. The market is K-shaped. Deals above $5 billion account for 48% of global deal value in 2026, and excluding megadeals, total value is down 4%, per PwC. Software Equity Group counted 698 SaaS deals announced in Q2 2026, up 9.6% year over year, at a 4.0x median EV/TTM revenue on disclosed transactions. Private equity entered the half with $1.3 trillion in buyout dry powder, and the Federal Reserve raised its target range a quarter point to 3.75% to 4.00% on September 16, 2026, which keeps financing selective and the premium for quality wide. The SaaS M&A Activity Q2 2026 report tracks the quarter’s deals in full. Below, we analyze what these market dynamics mean for software founders evaluating a potential exit.
How large was software M&A in 2025? Technology M&A reached approximately $1.08 trillion in 2025, up 66% year over year, with SaaS deal volume at record levels. This update from Windsor Drake, a boutique sell-side M&A advisory firm for founder-led software companies, tracks the transactions, multiples and buyer behavior behind that number. Reviewed August 5, 2026.
The Macro Picture
Global M&A value rose 41% in 2025 to $4.8 trillion, the second-highest year on record. Technology led all sectors, with deal value increasing 66% year-over-year to approximately $1.08 trillion. Deal count fell, but deal sizes increased significantly, with a record number of transactions exceeding $1 billion.
The headline numbers are dominated by megadeals, Google’s $32 billion acquisition of Wiz, Palo Alto Networks’ $25 billion proposed acquisition of CyberArk, SoftBank’s $40 billion investment in OpenAI. But for lower middle market software founders, the relevant signal is more nuanced: buyer appetite for recurring-revenue, data-rich software assets is strong across both strategic and financial sponsor categories. PE firms are actively deploying trillions in dry powder, and the sustained demand for AI capabilities, cybersecurity infrastructure, and vertical SaaS is filtering down to companies well below the $100 million threshold.
The market is bifurcated. Companies with strong fundamentals, efficient growth, high retention, defensible margins, command premium valuations. Companies without those metrics face a more selective buyer pool and longer timelines. For software founders considering an exit in 2026, the window is favorable, but only for businesses that can demonstrate quality to increasingly sophisticated buyers.
By The Numbers
| Tech M&A value | $1.08T | Technology M&A value in 2025, up 66% year-over-year. AI, cybersecurity, and enterprise software drove the majority of deal value. |
| SaaS deals (projected) | 2,500+ | SaaS M&A is on pace for a new annual record in 2025, with Q3 alone hitting 746 transactions, up 26% year-over-year. |
| Median SaaS revenue multiple | 4.0x | Median private SaaS M&A multiple in Q2 2026, per Software Equity Group. Average was 6.2x. Top-quartile companies transact at 8x+ revenue. |
| AI-related tech deals | ~75% | Nearly three-quarters of tech M&A deals in H1 2025 were AI-related by value. AI is the defining driver of capital allocation in software. |
| PE/VC-backed buyers | 59% | PE and VC-backed buyers participated in 59% of SaaS transactions in Q2 2026, per Software Equity Group. Strategic buyers represented 42%, primarily pursuing AI-aligned acquisitions. |
| Vertical SaaS share | 54% | Vertical SaaS represented 54% of announced SaaS deals in Q2 2026, up from 46% a year earlier. Buyers target embedded, mission-critical platforms. |
Sector Activity
Cybersecurity
Cybersecurity was the most active subsector by deal value in 2025. Google’s $32 billion acquisition of Wiz and Palo Alto Networks’ $25 billion proposed acquisition of CyberArk were the two largest transactions of the year. Below the headline deals, consolidation was pervasive across MSSPs, threat detection and response, and identity and access management. Public cybersecurity companies traded at a median 7.2x EV/TTM revenue in Q3 2025. For cybersecurity founders, the buyer universe is deep, competitive, and well-capitalized.
AI and data infrastructure
AI dominated capital allocation in 2025. Almost half of strategic technology deal value for transactions exceeding $500 million involved AI-native companies or deals citing AI as a primary benefit. Analytics and data management led all SaaS product categories with 125 deals in Q3 2025 alone. For lower middle market companies, the AI relevance is less about being an AI company and more about demonstrating how AI enhances or is integrated into your existing product.
Vertical SaaS
Vertical SaaS represented 54% of announced SaaS deals in Q2 2026, up from 46% a year earlier. In 2024, 44% of all SaaS deals involved vertically focused companies. Buyers are drawn to mission-critical, deeply embedded solutions that are difficult to displace. B2B SaaS companies serving specific verticals, healthcare, logistics, financial services, real estate, are among the most sought-after targets.
Fintech
Fintech consolidation continued throughout 2025 as embedded finance, payment infrastructure, and wealth management platforms attracted both strategic and sponsor interest. Regulatory complexity creates natural defensibility for fintech companies with established compliance infrastructure, making them attractive to buyers who would rather buy than build in regulated verticals.
Enterprise software and workflow automation
Content and workflow management maintained high transaction volumes with 119 deals in Q3 2025. Sales and marketing SaaS (99 deals) and business management platforms (80 deals) remained consistently active. Buyers continue to prioritize scalable platforms with embedded workflows that deliver measurable productivity impact and position organizations for AI expansion.
Valuation Environment
Private SaaS valuation multiples have stabilized after the post-pandemic correction. The median revenue multiple for private SaaS M&A transactions came in at 4.0x in Q2 2026, with the average at 6.2x. The gap between median and average reflects a market that sharply differentiates between average performers and standout platforms.
The 10-year median SaaS revenue multiple is 4.5x EV/Revenue across 537 transactions with disclosed multiples. A quarter of companies achieved valuations above 8.1x. A+ private SaaS businesses continue to transact at 15x to 20x revenue for outlier positions. Gross margin is a primary differentiator: in Q4 2024, companies with gross margins above 80% achieved a median multiple of 7.6x, compared to 5.5x for companies below that threshold. The range of achievable multiples is extremely wide, from sub-3x for companies with deteriorating metrics to 10x+ for companies that demonstrate efficient growth, strong retention, and defensible market position. Private SaaS valuations trail public market multiples by roughly four to eight months, and Kroll put the public SaaS median at 3.3x EV/NTM revenue in August 2026, still below long-term historical averages. For founders, see current valuation multiples by industry and size.
PE firms are both the most active buyers and the most motivated sellers. They participated in 59% of SaaS transactions in Q2 2026 and are deploying trillions in accumulated dry powder. Buyout investment value rebounded 37% year-over-year in 2024 to $602 billion, and the pace accelerated in 2025. Simultaneously, PE firms face significant exit pressure: portfolio holding periods have stretched to a median of approximately six years, with total inventory aging to 8.5 to 9 years. PE firms are actively acquiring platform companies in fragmented verticals, particularly businesses with $5M to $300M in enterprise value that can serve as the foundation for buy-and-build strategies, while PE portfolio companies are being brought to market as add-on acquisition targets.
What Buyers Are Evaluating in 2026
Acquirers are conducting deeper due diligence and seeking tangible value. The metrics that differentiate premium from average valuations in 2026 are clear.
Revenue quality over revenue growth
Buyers are scrutinizing net revenue retention, customer concentration, contract structure, and the durability of recurring revenue. Growth rate alone does not command a premium unless accompanied by efficient unit economics.
Gross margin as a valuation gate
The 80% gross margin threshold has emerged as a clear dividing line. Companies above it receive materially higher multiples; companies below it face harder questions about cost-structure scalability.
AI readiness
Buyers want a clear-eyed view of how AI will affect the target’s operations, customer value proposition, and competitive moat. Founders who can articulate the AI opportunity within their product, and the AI risk to their market position, stand out.
Rule of 40 compliance
The combined growth rate plus profit margin benchmark remains the primary screening metric for sophisticated buyers. Companies exceeding 40% attract materially broader buyer interest and competitive tension.
Efficient customer acquisition
CAC payback periods, LTV/CAC ratios, and the proportion of revenue from organic versus paid channels are all under scrutiny. Buyers want to understand whether growth will persist post-acquisition or depends on unsustainable spending.
The Exit Window
Multiple factors support continued strength through 2026: anticipated rate reductions, record PE dry powder, improving public-market valuations (which foreshadow private increases with a four-to-eight-month lag), strong corporate appetite for recurring-revenue assets, and the imperative to acquire AI capabilities rather than build them. But windows do not stay open indefinitely. For founders with strong fundamentals, a structured competitive process managed by an experienced sell-side advisor, with a sell-side quality of earnings, institutional CIM, and disciplined buyer outreach, is the difference between a 4x multiple and a 7x+ outcome.
FAQ
As of Q2 2026, the median private SaaS M&A revenue multiple is 4.0x, with the average at 5.4x. Multiples have stabilized in the 4x to 6x range over the past four quarters. Top-quartile companies transact at 8x+ revenue, and outlier A+ businesses can achieve 15x to 20x. The wide range reflects sharp differentiation by buyers based on growth efficiency, retention, and margin quality.
Multiple factors support the exit environment: record PE dry powder, strengthening public SaaS valuations (which historically lead private multiples by 4 to 8 months), corporate buyer appetite for AI-adjacent and recurring-revenue assets, though the Federal Reserve raised its target range to 3.75% to 4.00% on September 16, 2026. However, the market rewards prepared sellers. Companies with strong fundamentals, efficient growth, and institutional-quality financial materials will achieve materially better outcomes than those who come to market without preparation.
Buyers prioritize sustainable profitability over growth rate, gross margins above 80%, strong net revenue retention, low customer concentration, Rule of 40 compliance, efficient customer acquisition, and clear AI readiness. The shift from growth-at-all-costs to capital efficiency has been decisive. Companies that cannot demonstrate durable unit economics face longer timelines and lower valuations.
Extremely active. PE/VC-backed buyers accounted for 58% of all SaaS transactions in Q3 2025. Buyout investment value rebounded 37% in 2024 to $602 billion and accelerated in 2025. PE firms are pursuing both platform acquisitions in fragmented verticals and add-on strategies. Simultaneously, aging portfolios (median holding period ~6 years, total inventory at 8.5 to 9 years) are creating LP pressure for exits.
Cybersecurity leads by deal value, driven by its role as a prerequisite for AI deployment at scale. AI and data infrastructure lead by deal count, with analytics and data management recording 125 SaaS transactions in Q3 2025 alone. Vertical SaaS has surged to 54% of SaaS deal volume. Fintech, content and workflow management, and sales and marketing platforms all maintained strong activity.
Three factors: the quality of the underlying business metrics (retention, margins, growth efficiency), the quality of the financial presentation (sell-side quality of earnings, institutional CIM, clean data room), and the quality of the sale process (a structured competitive auction with multiple qualified buyers). The difference between a 4x and 7x+ outcome for companies with similar fundamentals often comes down to process execution.
Kroll’s August 2026 update expects strategic buyers to remain active, with first-half volume putting 2026 on pace for the second highest deal count on record, supported by PE deployment pressure and sustained corporate demand for AI capabilities and digital infrastructure. Downside risks include tariff uncertainty, potential policy disruption, and AI capex diverting capital from acquisition budgets. The market continues to favor prepared, high-quality assets with defensible fundamentals.
Kroll’s August 17, 2026 update put first-half software deal volume on an annualized pace of about 2,672 transactions, which would make 2026 the second highest year on record by count, with annualized deal value of about $240 billion. Within SaaS, Software Equity Group counted 698 deals announced in Q2 2026, up 9.6% year over year.
Kroll reported in August 2026 that median EV/LTM EBITDA multiples in software expanded 25% to 20.2x, while median strategic transaction multiples rose to 6.0x EV/LTM revenue. Public SaaS companies traded at a median 3.3x EV/NTM revenue, still below long-term averages. For private SaaS deals, Software Equity Group put the Q2 2026 median at 4.0x EV/TTM revenue.
Value rose sharply while deal count fell. Technology M&A increased 66% in 2025 to about $1.08 trillion, global M&A rose 41% to $4.8 trillion and a record number of deals exceeded $1 billion. Buyout investment had already rebounded 37% in 2024 to $602 billion. Vertical SaaS was 44% of SaaS deals in 2024 and 54% of announced SaaS deals by Q2 2026.
Volume is high and buyers are selective. PwC’s June 2026 outlook found that software M&A aimed at acquiring AI capabilities had cooled from 2025 levels, with sector valuations re-rated lower. Vertical SaaS made up 54% of announced SaaS deals in Q2 2026, up from 46% a year earlier. Financing costs rose when the Federal Reserve lifted its target range to 3.75% to 4.00% on September 16, 2026.
Windsor Drake advises founder-led companies on sell-side M&A. A first conversation is confidential and starts with your numbers.
Research, not investment advice, a fairness opinion or a valuation of any specific company. Third-party data is cited to its source and remains its owner’s. Windsor Drake is not a registered broker-dealer and does not offer, sell or place securities. When a transaction requires a registered broker-dealer, that work is handled by a registered broker-dealer partner.
