Here are the Reasons Why Private Equity Firms are Investing in SaaS Companies

Posted on May 5, 2019 By

There has been a steep incline in private equity investors buying SaaS (software as a service) companies over the last five years with PE firms investing in, recapitalising, and outright buying numerous SaaS companies. In fact, private equity accounted for 2.5% of all private equity portfolio acquisitions in 2018.

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So, what are the reasons for private equity firms investing so heavily into SaaS companies?

  •  High growth – with the majority of companies now using SaaS apps in their day-to-day operations, SaaS companies are experiencing high growth and, this looks as if it is set to continue, as a survey conducted by BetterCloud demonstrated that 73% of organisations who responded said that at least 80% of their apps will be SaaS by 2020.


  • Recurring revenue – subscriptions for SaaS products equate to recurring revenue therefore an attractive feature of SaaS companies, particularly as monthly recurring revenue bodes well for quality of earnings, a key metric for private equity acquirers.


  • Scalable business models – once the initial money has been spent on a product, additional products can be repopulated quickly for a minimal incremental cost whilst multiplying revenue.


  • Sector agnostic – SaaS platforms can be applied across any sector because they can provide a service for a business function (e.g. Human Resources tools), something which is applicable in all sectors.


A Closer Look at Industries and Business Functions

While sector agnostic, certain industries top the list of those served. According to data from Private Equity Info, education, healthcare, financial, retail, and real estate top this list which is perhaps unsurprising, as these market sectors are very process and data driven, lending to SaaS applications.

The main business functions that SaaS companies provide for include business management, human resources and marketing – again, these business functions being very process and data driven.



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Benchmark International’s global offices provide business owners in the middle market and lower middle market with creative, value-maximising solutions for growing and exiting their businesses. To date, Benchmark International has handled engagements in excess of $5B across 30 industries worldwide. With decades of global M&A experience, Benchmark International’s deal teams, working from 13 offices across the world, have assisted hundreds of owners with achieving their personal objectives and ensuring the continued growth of their businesses.


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