Market insight – The software-as-a-service sector
M&A in the software-as-a-service (SaaS) sector is expected to remain highly active and on an upward trajectory, driven by a mix of strategic consolidation and renewed investor confidence.
Since 2020, this sector has evolved from a period of rapid expansion to a more stable, performance-driven market.
The pandemic years saw a surge in demand as businesses moved online, but subsequently investors have become more selective and are focusing on companies with strong recurring revenues, loyal customer bases and clear profitability. High-quality businesses with steady growth and healthy margins continue to attract strong buyer interest.
A major shift has been the rise of artificial intelligence (AI), which is transforming how software products are developed, delivered and priced. AI is now being built into everything from workflow automation to customer service tools, creating opportunities for innovation but also driving consolidation as smaller firms struggle to keep pace.
Looking ahead, there is expected to be strong interest in SaaS platforms that serve specific industries, deliver measurable efficiencies and demonstrate reliable subscription-based income.
Larger technology groups and private equity investors are likely to continue acquiring to gain access to new technology, recurring revenue streams and established customer relationships — particularly where AI integration enhances long-term scalability and value creation.
How much is M&A activity rising?
In 2024, the total value of transactions increased by around two-thirds year on year. Within the software and SaaS space, deal volumes have now surpassed pre-pandemic levels, reflecting sustained appetite from both strategic buyers and private equity.
International interest in UK software firms has grown, with inbound acquirers — particularly from the US — recognising the UK’s strength in innovation, talent and mature SaaS infrastructure.
Overall, M&A momentum in the sector is underpinned by businesses seeking scale, stable recurring revenues, and access to new technology. For company owners, this ongoing demand highlights a strong window of opportunity to sell your SaaS business while market appetite and valuations remain high.
Sector definition
The SaaS sector encompasses businesses that deliver software applications via the cloud on a subscription or usage-based model. Instead of installing software locally, customers access services through a browser or API, enabling continuous updates, scalability and lower upfront costs.
The sector includes products such as CRM, ERP, HR & payroll, collaboration tools, vertical SaaS (industry-specific applications), cybersecurity SaaS, analytics platforms, developer tools, fintech SaaS, marketing automation, AI-enabled services and enterprise management systems.
SaaS solutions serve virtually every industry, including technology, financial services, healthcare, retail, manufacturing, real estate, logistics and government. They are critical to enterprise digital transformation, offering automation, compliance support, scalability and data-driven decision-making.
Factors driving growth
Digital Transformation Across Industries – Businesses of all sizes are modernising operations, moving away from legacy systems towards cloud-based platforms which improve efficiency, collaboration and scalability. This ongoing shift fuels sustained demand for SaaS solutions.
Adoption of AI and Automation – The integration of AI and machine learning into software platforms is transforming how organisations operate. From data analytics and cybersecurity to customer service and marketing automation, AI-driven tools are becoming business essentials rather than optional add-ons.
Shift to Subscription and Cloud Models – Predictable, recurring revenue models remain highly attractive to both investors and end users. Subscription pricing, combined with lower upfront costs, makes SaaS accessible to a wide range of customers, from SMEs to large enterprises.
Remote and Hybrid Working – The lasting effects of the pandemic have normalised hybrid work, driving demand for cloud-based productivity, collaboration and security software which enables flexible and secure working environments.
Strong Investment and M&A Activity – Private equity, venture capital and corporate acquirers remain highly active in the sector, viewing SaaS as a resilient, scalable and high-margin model. This investment supports innovation, international expansion and sector consolidation.
Cybersecurity and Compliance Needs – Growing regulatory requirements and cyber threats are prompting organisations to prioritise secure, compliant and continuously updated cloud solutions — a key strength of SaaS models.
Vertical Specialisation – Increasingly, software providers are targeting specific industries (such as healthcare, construction or professional services) with tailored solutions. These ‘vertical SaaS’ platforms often deliver faster adoption rates and stronger customer retention, driving market growth.
Key drivers and motivations for acquirers
Recurring and Predictable Revenue – SaaS businesses offer stable, subscription-based income streams that provide visibility and consistency — a major attraction for both trade and private equity buyers seeking to de-risk their portfolios.
Scalability and High Margins – Once developed, software products can be replicated and distributed globally with minimal additional cost. This operating leverage allows acquirers to achieve strong profit margins and attractive returns on investment.
Digital Transformation Demand – Organisations across every sector are modernising operations, driving continuous demand for cloud-based, data-driven and AI-enabled software solutions. Acquirers see this as a long-term structural growth trend that underpins sector resilience.
Cross-Selling and Market Expansion – Strategic buyers often pursue acquisitions to broaden their product offering, cross-sell to existing customers, or enter new vertical markets. This is especially common in niche or ‘vertical’ SaaS platforms tailored to specific industries.
Private Equity Buy-and-Build Strategies – PE firms are actively consolidating the fragmented SaaS landscape by acquiring platform businesses and bolting on complementary technologies to accelerate scale, increase valuation multiples and improve exit potential.
AI and Automation Integration – Many acquirers are motivated by access to advanced technologies — particularly AI, automation and analytics — which enhance product capability, operational efficiency and customer retention.
International Expansion – Overseas buyers view UK software companies as gateways to the European market, often attracted by strong technical talent, a well-developed SaaS ecosystem, and competitive valuations compared to US peers.
M&A interest from acquirers and investment routes
Acquirer Interest:
Strategic (Trade) Buyers – Technology companies, software incumbents or sector specialists often acquire SaaS businesses to expand their product offering, enter new verticals or gain market share. They are particularly attracted to proprietary technology, AI-enabled solutions, and platforms with strong customer retention.
Private Equity Investors – PE firms target SaaS businesses for their recurring revenue models and scalability, often using a ‘buy-and-build’ strategy to consolidate fragmented markets. These investors are focused on businesses with predictable ARR, high margins, and potential for bolt-on acquisitions.
Family Offices and Venture Funds – These investors are increasingly active in SaaS, particularly where there is strong growth potential, defensible technology and an opportunity to support the business in scaling internationally.
International Buyers – Overseas companies, particularly from the US and Europe, see UK SaaS firms as attractive due to strong technical talent, a mature SaaS ecosystem and competitive valuations.
Investment Routes:
Trade Sale/Strategic Acquisition – Selling directly to a larger technology or sector-specific company to leverage synergies and accelerate growth.
Private Equity Investment – Either a majority or minority stake to support growth, fund acquisitions or improve operational efficiency.
Minority Investment/Growth Capital – Often from venture or growth funds to fund expansion without relinquishing full control.
Public Markets/IPO – Less common for UK mid-market SaaS, but remains an option for larger businesses seeking capital for growth or international expansion.
Which SaaS companies have been sold by KBS Corporate?
Among the software-as-a-service businesses whose sales we have advised on are:
MD Consents acquired by Engaged MD
London-based MD Consents, a specialist provider of SaaS solutions for the healthcare sector, was sold to American company EngagedMD, a developer of intuitive solutions which automate administrative healthcare delivery tasks.
Pushfar acquired by ScaleUp Capital
PushFar, a world-leading, London-based global mentoring software platform utilised by professionals and students to progress their careers, was sold to ScaleUp Capital, which invests in growing companies to accelerate their expansion.
Advizzo, developer of a comprehensive SaaS solution that enables commercial organisations and their consumers to improve energy sustainability and cost efficiency, was sold to Manchester-based energy infrastructure specialist Calisen.
If you are a shareholder of a SaaS company, we would be keen to speak with you regarding your potential exit or succession plans. If you are open to exploring this avenue or have any questions, please do not hesitate to call us on 0161 222 0072.