Mastering the Sale of Your Software Company During Volatile Times

Eight steps to sell your software company successfully

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Mastering the Sale of Your Software Company During Volatile Times


Following our successful transactions in the Software space for CrossEngage, Zenloop, QiO Technologies, Cognitec and Imprivata (Thoma Bravo), we have gather unique experiences as to how best master the sale of a software company.


Selling a software company amidst market volatility demands not only a keen understanding of the broader economic landscape but also an in-depth grasp of tech-specific metrics and trends. The software industry, characterized by rapid innovation and disruption, requires a nuanced approach to navigate through turbulent periods successfully.


Here’s an expanded guide tailored for software company owners and tech entrepreneurs looking to sell their company, incorporating industry-specific strategies and terminology:


1. Deep Dive into Market Dynamics


Begin by thoroughly analyzing the current state of the tech sector and how broader economic volatilities are influencing software markets. Consider factors like investment trends in SaaS (Software as a Service), PaaS (Platform as a Service), and other software delivery models. Understanding the appetite for M&A (Mergers and Acquisitions) within your specific niche of the software industry is crucial. This involves staying on top of the latest tech disruptions, regulatory changes, and how global events are shaping investor sentiment towards the tech sector.


2. Leverage Key Performance Indicators (KPIs)


In the software industry, certain KPIs can significantly impact your company’s attractiveness to potential buyers. The Rule of 40 is an important metric for software companies, suggesting that the sum of your company’s growth rate and profit margin should exceed 40%. This rule helps demonstrate a healthy balance between growth and profitability, appealing to buyers by highlighting efficient operations and market potential. Prepare a detailed analysis of your company’s ARR (Annual Recurring Revenue), MRR (Monthly Recurring Revenue), customer churn rate, CAC (Customer Acquisition Cost), LTV (Lifetime Value), and other SaaS metrics that underline your company’s performance and scalability.


3. Emphasize Resilience and Innovation


Software companies that thrive, even in volatile markets, often have innovative products, a strong customer base, and agile business models. Highlight how your software solves critical pain points, its adaptability to market changes and how it integrates with emerging technologies like AI, blockchain, or IoT. Demonstrate your company’s resilience by showcasing successful pivots, sustained R&D (Research and Development) efforts, and how your product roadmap aligns with future tech trends. This will not only justify your valuation but also appeal to buyers looking for companies with long-term growth potential.


4. Valuation and Deal Structuring


Flexibility Given the high-stakes nature of tech M&A, be prepared for in-depth negotiations around valuation and deal structure. Software companies, especially those with strong SaaS metrics, might command premium valuations, but flexibility remains key. We are currently seeing in the market more and more creative structuring options like performance-based earn-outs, stock options, or deferred payment plans to align expectations and mitigate buyer risks. Advsiors need to articulate how these structures can offer mutual benefits, ensuring a smooth transition and future growth post-acquisition.


5. Engage Tech-Savvy Advisors


Partner with M&A advisors such as Saxenhammer who not only understand the intricacies of M&A but also have a solid footing and broad experience in the tech industry based on previous transactions. This also includes legal experts and accountants with a track record in software company transactions. As M&A advisors we can offer invaluable insights into crafting your company’s narrative, conducting tech due diligence and navigating intellectual property complexities. Our expertise in interpreting tech-specific metrics and trends can be crucial in communicating your company’s value to potential buyers.


6. Timing and Industry Trends


While conventional wisdom may suggest waiting for market stability, tech markets often operate differently. Rapid advancements and the emergence of new technologies can create unique selling opportunities. Keep a close eye on industry trends, such as shifts towards cloud computing, AI, or cybersecurity, and position your company as a leader or innovator within these trends. Timing your sale to coincide with these industry upswings can attract strategic buyers looking to bolster their portfolios with cutting-edge technologies.


7. Rigorous Preparation for Tech-Specific Due Diligence


Anticipate a comprehensive due diligence process, especially around your software’s architecture, code quality, IP rights, cybersecurity measures, and compliance with data protection regulations. Prepare detailed documentation on your software development lifecycle, API integrations, third-party dependencies, and any open-source software compliance. Transparency and thoroughness in presenting these aspects can significantly smooth the due diligence process, reinforcing buyer confidence in your technology and its market potential.


8. Effective Communication Strategy


Craft a compelling narrative around your company’s journey, innovation, and impact on customers and the market. This narrative should resonate not just with potential buyers but also with your employees and stakeholders. Keep communication channels open, ensuring that your team is aligned with the sale process and motivated to maintain performance. Engaging effectively with potential buyers, from initial pitches to detailed tech demos, can make a marked difference in their interest and perceived value of your company.




Selling a software company in volatile times is a multifaceted challenge that requires strategic planning, industry insight, and adaptability. By focusing on critical tech-specific metrics like the Rule of 40, demonstrating your company’s resilience and innovation and engaging the right advisors such as Saxenhammer, you can navigate the complexities of the market. Preparing meticulously for due diligence and adopting a flexible approach to valuation and deal structuring can further align your objectives with those of potential buyers. With these strategies, you can not only impress but also secure the right deal for your software company, even in the face of market volatility.


Would you like to find out more or arrange a consultation?


Please contact our partner and Head of Technology Dr. Nicholas Hanser