5 deals that indicate SaaS could be the next big M&A target

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5 deals that indicate SaaS could be the next big M&A target

By iDeals
October 17, 2022
8 min read

“Software is eating the world,” venture capitalist Marc Andreessen wrote in a 2011 Wall Street Journal op-ed. Nearly 10 years later, it appears that software may be eating corporate-growth strategies, as well.

Mergers and acquisitions involving software-as-a-service, or SaaS, companies reached an all-time high in 2019, writes Sammy Abdullah, cofounder at Blossom Street Ventures.

Traditionally, SaaS M&A deals focused on acquiring a software company’s tech. But times may be changing.

“Based on the latest survey results, there may be a pivot away from purchasing a company simply for its technology,” write Russell Thomson, Susan Dettmar and Mark Garay in a Deloitte report. Now, however, more companies are interested in using SaaS M&A to expand their own reach rather than merely to acquire new tech.

Five SaaS acquisitions in 2019 and 2020 demonstrate this shift in corporate-growth strategies.

Google acquires Fitbit

One of the biggest M&A headlines in 2019 was Google’s plan to acquire Fitbit, at a value of approximately $2.1 billion.

The acquisition helps Google become more competitive in the wearable tech sphere, an area in which Apple currently has a strong lead. “We plan to work closely with Fitbit to combine the best of our respective smartwatch and fitness tracker platforms,” says Rick Osterloh, senior vice president of devices and services at Google.

The move represents a shift in strategy for Google, which to date has been dedicated to creatings its own operating systems for its devices. This strategy resulted in the wildly popular Android OS for smartphones. Google’s Wear OS for wearable trackers, however, hasn’t inspired the same level of buy-in from consumers, says Dylan Lewis, host of the Motley Fool podcast. Fitbit’s popularity should help Google grab a larger share of the wearables market.

Fitbit sees the acquisition as a benefit to its own mission, too. “Google is an ideal partner to advance our mission,” says James Park, cofounder and CEO of Fitbit. “With Google’s resources and global platform, Fitbit will be able to accelerate innovation in the wearables category, scale faster, and make health even more accessible to everyone.”

PayPal acquires Honey

In November 2019, PayPal announced its plan to acquire Honey Science Corporation for about $4 billion. Founded in 2012, Honey focuses on helping consumers find ways to save money online with mobile shopping assistants, price trackers and discount-seeking tools.

“Honey is amongst the most transformative acquisitions in PayPal’s history,” says Dan Schulman, president and CEO of PayPal. “It provides a broad portfolio of services to simplify the consumer shopping experience, while at the same time making it more affordable and rewarding.”

Honey’s tools help PayPal expand its own work in providing digital financial tools for its 275 million-plus active consumer accounts.

The deal also helps PayPal advance its mission to function as a standalone, platform-agnostic fintech tool since its spinoff from eBay in 2015, Matthew Cochrane at The Motley Fool writes. “Honey paves the way for PayPal to offer more value to its account holders and differentiate itself from competitors.”

Facebook acquires CTRL-labs

After being outbid by Google in its attempt to acquire Fitbit, Facebook turned its focus to another deal: The acquisition of CTRL-labs, a New York startup that focuses on interfaces between computers and the human brain.

CTRL-labs will join Facebook Reality Labs to focus on “more natural, intuitive ways to interact with devices and technology,” says Andrew Bosworth, Facebook’s vice president of AR/VR.

Bosworth notes that intuitive technologies, augmented reality (AR) and virtual reality (VR) “can change the way we connect.” Facebook Reality Labs and CTRL-labs plan to continue joint work on the latter’s wristband, which allows users to control an on-screen pointer with concentration, but without physical movement.

GitHub acquires Semmle

As one of the largest open-source coding communities, Microsoft-owned GitHub and its users deal with the realities of cybersecurity every day. These challenges lie behind GitHub’s September 2019 announcement of a deal with Semmle, a semantic code analysis engine.

“At GitHub, we have a unique opportunity and responsibility to provide the tools, best practices, and infrastructure to make software development secure,” says Nat Friedman, CEO of GitHub.

Semmle’s existing client base included security teams at Uber, NASA, Google and Microsoft, says Friedman. The software allows users to find vulnerabilities in codebases more quickly, which can then be addressed by developers or shared with open-source communities.

The relationship is a natural one for developers. “GitHub is the one place where the community meets, where security experts and open-source maintainers collaborate, and where the consumers of open source find their building blocks,” says Oege De Moor, Semmle CEO and cofounder.

By incorporating Semmle’s tools into GitHub’s work, both companies seek to further their missions to support the creation of code that works.

McDonald`s acquires Apprente and Dynamic Yield

SaaS acquisitions don’t always involve the marriage of two technology companies. Established retailers, restaurants and other businesses have also begun investing heavily in the tech space in order to transform their own work to meet the demands of today’s world.

Such is the case with McDonald’s, which announced deals in 2019 with two AI companies: Apprente and Dynamic Yield.

In March, McDonald’s said it would acquire Dynamic Yield, a tech company focused on personalization and design logic technology. One of McDonald’s goals is to use Dynamic Yield’s tech to personalize the ordering process in its drive-thrus, the company said in a press release.

In September, McDonald’s announced its acquisition of Apprente, which specializes in building artificial intelligence that can parse and respond naturally to human speech. Instead of generating a transcript and then parsing it, Apprente attempts to translate speech sounds directly to meaning that a computer can use.

Apprente “believe this provides a better approach for customer-experience-related use cases, particularly in noisy environments such as restaurants,” where customers can be difficult for software to hear, says Raúl Castañón-Martínez, a senior analyst at 451 Research.

Most consumers associate McDonald’s with hamburgers, not technology. Yet the company’s growth strategy depends heavily on its use of new technologies, according to its executives.

“Technology is a critical element of our Velocity Growth Plan, enhancing the experience for our customers by providing greater convenience on their terms,” says Steve Easterbrook, president and CEO of McDonald’s Corporation.

Additional deals in the SaaS M&A world recently include Microsoft’s September 2019 acquisition of Movere, a cloud-migration specialist; Swiss fintech company Temenos announcing an acquisition of mobile app specialist Kony; and the merger of big data firms Splunk and SignalFX.

In each case, the companies involved seek not only to acquire new tech, but to expand on their existing specialties by combining with a company whose skill sets overlap with their own. Each relationship benefits its participants — and each represents another step in software’s quest to eat the world.

Top data points that make or break SaaS acquisitions

Making a return on investment is the primary concern of financial buyers, whether it’s a private equity firm or an individual. 

So, to convince the buyer that their SaaS company is an attractive investment and the price and terms are fair, sellers need to review the data points below.


  • Annual recurring revenue

    Annual recurring income is the income from subscriptions for a yearly period. Ideally, this figure should increase. Stagnation, in turn, is a red flag for investors.
  • Monthly recurring revenue

    Monthly recurring revenue should increase yearly, like ARR. However, if a SaaS business has fluctuating MRR, this indicates problems with the churn, dependence on marketing campaigns, and seasonality.
  • Earnings before interest, taxes, depreciation, and amortization

    EBITDA describes a SaaS company’s profitability without considering financing and capital expenses. In other words, it demonstrates the profitable growth potential of the SaaS business. 


  • Churn

    There is no industry standard for churn for SaaS businesses as such. But for example, some online resources claim an average 3-8% monthly churn rate. If it exceeds 10%, buyers may question the SaaS company.
  • Customer acquisition cost

    The less a startup spends on customer acquisition, the better the company’s marketing works. Consequently, CAC shows the buyer opportunities for developing and growing this business without much effort.
  • Customer lifetime value

    CLV of a sustainable business should be three times the customer acquisition cost. Along with this, buyers look at CAC and churn in their valuation of  a startup.


  • Number and size of competitors

    Knowing the size of a startup’s competition allows buyers to infer potential profits once the business is acquired. A saturated market is not a problem if it is fast growing. But the lack of competition may indicate that the company’s activities could be more worthwhile.
  • Past acquisition data

    Startups must know how much to sell themselves for. Thus, investment organizations will likely refrain from deceiving the acquired companies by putting forward unfavorable conditions. 


  • Intellectual property

    Intellectual property is the lifeblood of SaaS businesses, so an investor must be sure that it is well protected. For example, if the IP is open-source, investors expect an explanation of why this will not affect the startup’s business model.
  • Tickets

    Since buyers usually look at customer support tickets, ensure you know what secrets they keep. Note that tickets may indicate a misunderstanding of your target market or a weak team of engineers.


  • Brand

    To measure the effectiveness of a brand, SaaS companies need aggregated data on media coverage, website traffic, and customer interactions with their marketing campaigns in a single report.
  • Reviews

    The probability of acquisition increases if the company boasts a good customer experience, which genuine reviews should evidence.
  • Net promoter score

    This indicator shows how willing customers are to recommend a product or service to others.
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