Due to the continued growth of businesses and the inflow of capital, the software and IT sector has seen significant consolidation and M&A activity in recent years. Industry growth has been accelerated by 5G internet infrastructure and an increase in online commercial activity after the outbreak. BB Capital, the top private market M&A advisory firm in Saudi Arabia, is aware that selling a company is a significant choice. A committed business owner aims to sell their company to a qualified buyer who can carry on the company’s legacy in addition to maximizing the amount of money they can get from the sale.

BB Capital brings a wealth of deal-negotiating experience to the table, having worked on more than 100 valuation and M&A consulting mandates in the software and IT industries. Our knowledgeable advisory staff will help your company through the whole sell-side M&A process.

Understanding certain crucial elements unique to the Software & IT Services industry that could affect the possibility of a possible sale is crucial for entrepreneurs and business owners considering a possible sale. These elements influence how appealing a company is to possible investors and buyers.

Research & Development: The software and IT sector is a vibrant and fiercely competitive one. Due to intense competition and low entry barriers, developers must continuously engage in R&D and product development in order to remain competitive. Businesses with in-house teams of talented developers and proprietary software and IT solutions are prime candidates for acquisitions. Additionally, the possibility of a successful purchase can be raised by having a product roadmap.

Revenue Retention: In the SaaS industry, net revenue retention is a crucial metric that calculates the total revenue generated less the revenue lost as a result of client attrition. Businesses that effectively acquire new clients while keeping a sizable percentage of their current clientele are said to have a high net revenue retention rate. High multiples are justified for software and IT solutions companies that have a solid track record of growing their user base. Investors frequently base their investments in software firms on an enterprise value/recurring revenue multiple. Therefore, having a large number of loyal consumers can raise a company’s valuation.

Platform Stickiness: This qualitative measure assesses how simple or complex it is for a client to stop using a certain developer or IT firm’s subscription services. Platform stickiness is high among businesses who have effectively developed a highly useful product or platform that is intricately linked with a customer’s IT infrastructure. This establishes a barrier to entry by enclosing these businesses in an economic moat. As a result, investors find these businesses appealing.

Scalability: Due to their robust growth prospects, software and IT companies with a sizable addressable market and a scalable business plan are deemed appealing. Because these businesses have the potential to generate significant cash flow in the future, investors are frequently ready to pay a premium for them. Additionally, businesses that exhibit robust growth and are able to take advantage of economies of scale to increase margins can unlock value through multiple expansions.

Whether it’s a sale or a valuation, our team can offer resources and experience that are only available at larger companies, together with the individualized attention of our M&A Advisory team. Reach out to one of our advisors by contacting us right now.