Private Equity Investing in Software as a Service (SaaS) Companies

Private Equity Investing in Software as a Service (SaaS) Companies

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.

Harvest Business Advisors provides business brokerage, business valuation, and business succession planning services. We have extensive experience in the information technology and professional services, manufacturing, distribution, and contracting fields. We maintain offices in Maryland, New Jersey and Virginia. Connect with us at or 877-838-4966 to discuss selling your business, ordering a business valuation or buying a business.

How to Sell Your Business – Types of Buyers, Private Equity Groups (PEGS)

Selling your business is quite complex.  One of the most important things you should understand in order to get the highest business value who your buyer is and what they might want.  PEGS or Private Equity Groups are a viable group of buyers.

Considering Selling Your Business? Please click here for a downloadable e-book, “ 10 Ways to Increase the Value of Your Business“.

Private Equity Groups, also known as PEGS.  PEGS are investment groups.  They want to buy a business – grow it quickly and exit in 5 to 7 years.  For a business to be a fit for them there must be a plan for growth.  Generally, to get into a line of business they are not already in, these Buyers usually want businesses with at least three million dollars of EBITDA.   The first buy in an industry by a PEG is generally called a Platform.  If they are already owners of the same type of business they may buy a smaller competitor.  This is called an add-on transaction.  They will joint venture with Sellers who are willing to sell control.  This can be a good group of prospects if the management wants to buy the business but does not have sufficient capital and the business has very good growth prospects and is fairly large. 

Business brokers and business intermediaries can assist you in finding PEGS and other buyers.  Remember, identify your best buyer and market to them.

Gregory R. Caruso, JD, CPA, CVA
Harvest Business Advisors