Kroll Report: Growth and Valuation Dynamics in the Software Sector
Software M&A volume hits record in 2026, but deal values remain low.
1Record Deal Count, Low Deal Value
In the first half of 2026, the software sector saw 2,672 M&A transactions, the second highest after 2025's 2,939 deals. However, annualized deal value stands at $240 billion, half of which comes from a single transaction (Cursor's $60 billion acquisition). Excluding Cursor, the annualized deal value drops to $120 billion, one of the lowest levels in the last decade. This highlights the concentration of value in few mega-deals.
2Valuation Gaps Between Subsectors
Kroll's report reveals significant valuation disparities among software subsectors with similar growth and margins. For instance, Engineering software trades at 5.2x revenue multiple while HCM software trades at 3.0x, despite both having identical Rule of 40 scores of 46%. These gaps can't be explained by traditional metrics, suggesting factors like revenue durability and AI impact play crucial roles in valuation differentials.
3Growth Trumps Profitability
2026 data shows growth has become far more important than margins in software valuations. Companies growing above 20% command a 7.2x median revenue multiple, compared to 3.1x for 0-10% growers. Interestingly, the fastest-growing companies have lower EBITDA margins (25.1%) than slower growers (31.6%). This indicates profitability has become table stakes rather than a differentiator in today's market.
4Private vs. Public Company Valuations
In H1 2026, median EV/LTM revenue multiples for strategic acquisitions reached 6.0x, nearing the 2021 peak of 6.2x. In contrast, public B2B software companies trade at just 3.3x EV/NTM revenue. This significant gap suggests private companies are commanding premium valuations compared to their public counterparts. Public multiples remain well below the 15-year median of 5.4x, indicating continued pressure on public software valuations.
5The AI Premium
The report highlights substantial valuation premiums for AI-focused companies. For example, Salesforce paid 9.5x revenue for Fin, while public comps in the same category trade at 1.8x. This premium reflects Fin's positioning as an AI agent company rather than customer-service software. Similarly, Autodesk paid 26.7x ARR for MaintainX, demonstrating how AI capabilities can dramatically impact valuation multiples.
6Sector Consolidation Accelerates
The software sector saw accelerated consolidation in 2026, with three major acquisitions occurring within 30 days: Intercom/Fin, Cognite, and MaintainX. These deals share a common theme - all target companies providing data for AI applications. Kroll predicts this trend will continue, particularly for B2B software companies in the $10M-$50M ARR range. The concentration of deal value in few transactions suggests buyers are becoming more selective.
7Investor Implications
Kroll's findings offer critical insights for investors. First, growth has surpassed profitability as the key valuation driver. Second, category positioning now impacts valuation more than growth or margin metrics. Third, AI-focused companies command significant premiums over traditional software firms. Finally, private companies enjoy valuation advantages over public counterparts. These trends suggest investors should prioritize growth trajectories and technological differentiation when evaluating software opportunities.
8Future Outlook
Kroll analysts expect current software sector trends to persist. Growth-oriented companies will likely maintain premium valuations, while profitable but slow-growth firms may face challenges. AI and data-centric companies will remain attractive acquisition targets, especially in the $10M-$50M ARR range. The sector's 2027 performance will depend on economic conditions and technology investment trends. As the Rule of 40 becomes less predictive, investors may need new frameworks to assess software valuations in this evolving landscape.
Original article: SaaStr — Kroll Raporu: Yazılım Sektöründe Büyüme ve Değerleme Dinamikleri