The Secret SaaS to Valuation
(2023) IBUH19 20241Department of Business Administration
- Abstract (Swedish)
- This thesis investigates the applicability and legitimacy of the relative valuation method within the Software-as-a-Service industry by comparing the implied enterprise values of SaaS companies in transactions to values estimated using peer group valuation multiples. To achieve this, a sample of 66 Nordic M&A and private placement transactions completed between 2020 and 2024 were selected for analysis. The main finding of the research is that the industry-specific multiple performs significantly better than traditional multiples for the studied companies. Another finding is that, in general, traditional valuation multiples have less explanatory power for SaaS companies compared to traditional companies, likely due to the unique... (More)
- This thesis investigates the applicability and legitimacy of the relative valuation method within the Software-as-a-Service industry by comparing the implied enterprise values of SaaS companies in transactions to values estimated using peer group valuation multiples. To achieve this, a sample of 66 Nordic M&A and private placement transactions completed between 2020 and 2024 were selected for analysis. The main finding of the research is that the industry-specific multiple performs significantly better than traditional multiples for the studied companies. Another finding is that, in general, traditional valuation multiples have less explanatory power for SaaS companies compared to traditional companies, likely due to the unique subscription-based business model and recurring characteristic of revenue within the industry. These findings imply the need for a tailored approach in valuing SaaS companies, where traditional valuation multiples yield inadequate results. Instead, investors and valuation practitioners should consider the specific dynamics of the SaaS industry and select value drivers for relative valuation accordingly. Suggested future research includes exploring other multiples in the SaaS industry as well as other contexts, such as the large American SaaS market. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9166951
- author
- Bäckström, Axel LU ; Winnerblad, Melker LU and Tångring, Erik LU
- supervisor
- organization
- course
- IBUH19 20241
- year
- 2023
- type
- M2 - Bachelor Degree
- subject
- keywords
- SaaS, Relative Valuation, Annual recurring revenue
- language
- English
- id
- 9166951
- date added to LUP
- 2024-08-07 17:36:21
- date last changed
- 2024-08-07 17:36:21
@misc{9166951, abstract = {{This thesis investigates the applicability and legitimacy of the relative valuation method within the Software-as-a-Service industry by comparing the implied enterprise values of SaaS companies in transactions to values estimated using peer group valuation multiples. To achieve this, a sample of 66 Nordic M&A and private placement transactions completed between 2020 and 2024 were selected for analysis. The main finding of the research is that the industry-specific multiple performs significantly better than traditional multiples for the studied companies. Another finding is that, in general, traditional valuation multiples have less explanatory power for SaaS companies compared to traditional companies, likely due to the unique subscription-based business model and recurring characteristic of revenue within the industry. These findings imply the need for a tailored approach in valuing SaaS companies, where traditional valuation multiples yield inadequate results. Instead, investors and valuation practitioners should consider the specific dynamics of the SaaS industry and select value drivers for relative valuation accordingly. Suggested future research includes exploring other multiples in the SaaS industry as well as other contexts, such as the large American SaaS market.}}, author = {{Bäckström, Axel and Winnerblad, Melker and Tångring, Erik}}, language = {{eng}}, note = {{Student Paper}}, title = {{The Secret SaaS to Valuation}}, year = {{2023}}, }