Software M&A at Mid-Year: Record Consolidation Meets the AI Discount
Software M&A entered 2026 at full speed and has not slowed. Last year closed with roughly 2,700 SaaS transactions - up 28% on the prior year - and the first quarter of 2026 added another 659 announced deals. Private equity is the engine: sponsor-led enterprise SaaS buyouts hit record counts, and the largest software investors have been writing their biggest cheques ever, from the $12.3 billion Dayforce take-private to the $8.4 billion acquisition of Smartsheet.
The paradox: record volume, compressed multiples
At the same time, the public reference points have fallen hard. Median public software EV/revenue sits near 3.4x as investors discount SaaS on AI-disruption fears. In the private mid-market, the spread tells the real story: bootstrapped businesses cluster around 4-5x ARR, equity-backed growers at 5-8x, and category leaders with strong net retention still command 7-10x or more. Undifferentiated products, meanwhile, clear at 3-4x - when they clear at all.
What separates the two markets
- Net revenue retention. Buyers now underwrite NRR before growth. A 115% NRR business at moderate growth outprices a 40%-growth business with churn.
- AI positioning. The question in every management presentation this year: does AI erode this product's moat, or widen it? Sellers need a defensible answer, not a roadmap slide.
- Rule of 40 discipline. Efficiency has replaced growth-at-any-cost. Businesses at or above the threshold consistently attract multiple bidders.
IT services: quiet consolidation
Below the headline SaaS numbers, managed service providers and IT services firms are consolidating rapidly across Europe - platform buyers backed by sponsors are executing dozens of add-ons per year, and owner-operators in the €5-50 million range are receiving unsolicited approaches at a pace we have not seen since 2021. Unsolicited rarely means best price: a single-buyer conversation forfeits the competitive tension that moves multiples.
Our read for owners
The software market of 2026 pays premium prices - but only for prepared companies that can evidence retention, efficiency and AI durability. For everyone else, the AI discount is real and widening. If your metrics are strong, this is a seller's window. If they are not yet, the gap between 4x and 7x is a two-year preparation plan, not a negotiation problem.
"In software, the market is no longer paying for revenue. It is paying for revenue that provably survives AI."
Alexander Vogel, Managing PartnerOwn a software or IT services company? Know your range.
We track the buyers consolidating SaaS, IT services and digital infrastructure across Europe.