Why is SaaS attractive to Private Equity firms?
- High growth
- Recurring revenue (which speaks to quality of earnings)
- Scalable business models
- Asset-light companies that do not require significant capital expenditures to grow.
- Overall trend across all industries to harness data and streamline processes to enable companies to garner more intelligent business insights for more efficient and productive operations.
It seems intuitive that industries such as Education, Healthcare, Financial, Retail, and Real Estate top this list. These market sectors are very process and data driven, lending to SaaS applications. What is surprising is that Education tops leads the list. One would think that Healthcare and Financial applications would tower over the Education market in terms of SaaS applications and adoption.
Some SaaS companies do not target a specific industry. Instead, they provide a service for a business function, across industries.
For SaaS companies serving specific functional areas, Business Management and Human Resource tools top the list by a significant margin, followed by Marketing. Again, all three of these functional areas are very process and data driven.
Clients choose Harvest Business Advisors for our sage advice on profitably growing their business, accurate business valuations, and when the time is right, a consistent ability to deliver a high price as part of a smooth exit transaction.
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