Private equity valuation multiples for SaaS businesses have fallen sharply as sponsors contend with AI disruption risk, higher financing costs and a market increasingly focused on profitability rather than growth.
Median enterprise value-to-EBITDA multiples on private equity SaaS deals dropped to 11.7x in the first half of 2026 from 20.4x, according to new research from Forvis Mazars and PitchBook.
The decline has almost eliminated the valuation premium SaaS businesses have historically commanded over other companies.
Forvis Mazars technology and software national industry leader Ricardo Martinez said investors were putting greater weight on profitability, cash flow and competitive differentiation as the premium that characterised software investing over much of the previous decade narrowed.
The valuation reset has come alongside a slowdown in sponsor activity. Private equity investors completed 702 SaaS transactions worth $58.8bn during the first half, with the researchers pointing to a pullback in sponsor activity and fewer billion-dollar deals.
That contrasts sharply with the headline figure for the broader SaaS M&A market.
AI-driven strategic acquisitions pushed total global SaaS M&A value to a decade-high $439.7bn during the period, according to the report, leaving aggregate transaction value heavily influenced by a relatively small number of very large deals.
Exit conditions have remained difficult despite that strategic activity. The researchers estimated 1,458 global SaaS private equity and venture capital exits in the first half of 2026, compared with 1,652 across the whole of 2025.
They said the broader exit environment remained substantially weaker than headline transaction values suggested once a handful of outsized deals were removed.
The difficulties facing software investors form part of a wider constraint on private equity’s capital recycling cycle.
Global private equity fundraising is on course for a third consecutive annual decline, according to the research, while industry dry powder has remained around $4.4tn and net cash flows have been negative since 2022.
That combination leaves managers holding large amounts of undeployed capital while distributions remain under pressure, limiting the capital returning to LPs for new commitments.
Public markets have provided only a limited alternative exit route for SaaS investors. Just 23 SaaS companies completed IPOs during the first half of the year, with mixed post-listing performance reinforcing the greater scrutiny being placed on growth businesses entering public markets.
The report also highlighted increasing scrutiny of the way software companies present the cost of AI investment.
Some businesses are increasingly using non-GAAP metrics that remove AI-related spending from core operating measures, according to the researchers, creating greater pressure on boards and investors to examine underlying cash generation rather than adjusted performance figures.
Martinez said the reopening IPO market was creating opportunities, but added that public investors were signalling that growth by itself was no longer sufficient.
For private equity buyers, the 11.7x median multiple represents a very different SaaS investment environment from the one in which software assets routinely attracted large premiums based on recurring revenue growth.
Forvis Mazars and PitchBook said businesses capable of demonstrating durable cash flow, defensible competitive positions and disciplined use of AI were better placed as investors became increasingly selective.
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