SaaS valuations rebound, but private tech M&A stays selective

L40° says public SaaS valuations recovered nearly 48% from June lows by the end of August 2026, while private tech deal pricing remained far below the eye-catching multiples seen in a handful of AI transactions. The firm’s Q3 market update also shows strategic buyers kept doing deals at a steady pace even as overall dollar value declined.

Why it matters: - Public SaaS stocks are healing, but private buyers are still paying disciplined prices. - The gap matters for founders, investors and advisers weighing exit timing, deal structure and whether AI-driven headlines reflect the broader market. - L40° says most capital continues to flow into ordinary transactions, not the extreme outliers that dominate attention.

What happened: - L40° released its Q3 2026 SaaS & Tech M&A Market Update on Sept. 30, 2026. - The SaaS Capital Index, which tracks 63 U.S.-listed pure-play B2B SaaS companies, rose to 4.6x ARR by Aug. 31 from 3.1x in June. - The index’s June low marked a nearly 48% rebound in public SaaS valuation multiples. - In private tech M&A, 31 disclosed transactions completed in 2026 averaged 6.2x EV/Revenue when deals valued at 20x EV/Revenue or above were excluded. - Sub-$1 billion transactions averaged 3.9x EV/Revenue in the mid-market.

The details: - Disclosed deals at 20x EV/Revenue or above averaged 29.3x EV/Revenue, highlighting how far AI-linked outliers can sit from the broader market. - Roughly 74% of capital deployed across the disclosed-deal sample went to non-outlier transactions. - L40° says $62 billion was deployed outside the 20x-plus group. - Strategic M&A value fell 18% in H1 2026 from H1 2025. - Strategic buyers deployed $59 billion in H1 2026. - Average strategic deal value declined from about $250 million to about $200 million. - Strategic buyers completed between 137 and 155 acquisitions per quarter across the last six quarters through Q2 2026. - Strategic buyers completed 155 acquisitions in Q2 2026. - Private equity deal value fell 31% in H1 2026 from H1 2025 to about $46 billion.

Between the lines: - The market is not seeing a broad pullback in buyer activity. - The data points instead to smaller transactions absorbing more of the volume while headline value softens. - Public-market performance is also splitting sharply by software category, which suggests investors are rewarding some growth profiles and punishing others. - L40° frames that split as a public-market signal, not a direct measure of private buyer demand. - In an anonymized 2026 sell-side process for a company with $30 million to $60 million in enterprise value, five offers were received. - Competitive bidding increased fixed consideration by 23% and total consideration by 88% versus the winning buyer’s initial offer. - Most of the increase came from contingent consideration, showing how structure can matter as much as headline price.

What's next: - L40° expects software and technology M&A to continue into Q4 2026 with uneven pricing across categories. - Buyers and sellers will likely keep watching whether public SaaS multiples sustain their rebound or give back gains. - Competition among bidders can still materially improve outcomes for well-run processes.

The bottom line: - SaaS valuations are recovering, but private M&A remains far more selective than the AI-fueled top-line headlines suggest. - The broader market still looks like one of disciplined pricing, smaller deals and selective bidding, not indiscriminate exuberance.

Read the full report: L40° SaaS & Tech M&A Market Update