07.05.2024
Our quarterly SaaS valuation insights report focuses on the Translink SaaS Index (”TSI”), offering a comprehensive analysis of index constituents, SaaS M&A trends, and the wider European SaaS market. This update aims to deliver our primary insights and observations concerning the mid-market SaaS valuation landscape in Q1/2024.
Distinguishing itself from other comparable indices, TSI primarily comprises small to mid-sized public SaaS companies in the Nordic and European regions. It includes 132 companies, with 38% headquartered in the Nordics, 23% in other parts of Europe, 30% in the United States, and roughly 9% in other global markets. Importantly, our index intentionally excludes large-cap SaaS companies.
We firmly believe that our proprietary index serves as a valuable benchmark for assessing the valuations of small and mid-sized SaaS firms, which are typically the focus of transactions within our core European markets.
SaaS valuation insights report excerpts
Upward pressure in public SaaS valuation multiples: Throughout Q1/’24, SaaS valuation multiples have remained close to their one-year averages. Presently, the EV/LTM Sales multiple for TSI stands at 3.2x, notably below its five-year average of 5.7x. We reiterate our anticipation of increasing SaaS valuations, especially with the European Central Bank poised to adjust interest rates in the near future. In the first quarter of 2024, we continued to observe take private transactions which echo the pricing discrepancies between public and private valuations that we highlighted in our previous report.
Profitability has surpassed growth as the primary factor behind the Ro40 figure: Upper quartile constituents are trading at 5.2x. The median Ro40 figure for these companies stands at 48%, with profitability contributing to nearly two-thirds of this figure.
Vertical SaaS companies typically outperform horizontal SaaS companies, resulting in a higher valuation multiple: At the end of Q1/’24, Vertical SaaS companies traded approximately 29% higher in EV/LTM Sales compared to their horizontal counterparts.
Nordic SaaS M&A activity stayed steady in Q1/2024: While there was a slight decline compared to previous years’ first quarters, activity remained robust, indicating resilience amid geopolitical and economic challenges affecting Nordic SaaS companies’ performance and outlook.
Despite overall gloomy market sentiment in 2023, SaaS investors remained active throughout the year: Despite facing challenges, the SaaS sector has upheld its momentum, with Nordic SaaS companies garnering interest from global investors. This has resulted in transaction volumes holding at a steady level compared to previous years. Substantial reserves of private equity capital have accumulated from previous years and the competition for top-tier Nordic SaaS businesses is steadily intensifying. As seen in the previous chart, nearly 50% of the Nordic SaaS M&A transactions recorded in Q1/2024 involved financial investors.
Download our SaaS valuation insights report
In our quarterly SaaS valuation insights report, we strive to provide an overview of the latest developments and trends related to valuations accompanied with our proprietary insights and learnings from live projects and observations from engaging with both clients, strategic players, and investors in our cross-border advisory practice.
The full SaaS valuation insights report can be downloaded by clicking the link below, and the report will also be published on our website on a quarterly basis.
Tero Nummenpää, Partner
Ruben Moring, Partner
Juuso Marttinen, Partner