The Private Equity Playbook for SaaS Company Success
The PE Playbook for SaaS Companies: How to Unlock Hidden Value
For private equity investors, an innate ability to identify, find, and unleash the power of hidden value is critical in the SaaS space.
Indeed, PE’s interest in SaaS companies began around 2012. Despite their lack of hard assets to lend against, the predictability of subscription-based recurring revenue models offered sponsors a reason to invest, even if the path to a return on that investment was unclear.
In the decade since, realizing ROIC from SaaS-based investments has become formulaic. It’s detailed during diligence in a prescriptive 100-day go-forward plan that exploits all the traditional drivers of value creation. But, given the combination of high valuations, companies created through numerous add-ons, and the acceleration of holding times, SaaS sponsors with an exit-ready mindset need to do more than just exploit those traditional drivers – they need to find (and then exploit) the five hidden keys of SaaS value.