Published on
December 23, 2025
How AI Is Reshaping SaaS M&A: Deal Structures & Earnouts
Discover how AI is reshaping SaaS M&A with trends, deal structures, and insights from industry leaders.
The SaaS mergers and acquisitions (M&A) landscape is undergoing a seismic transformation, driven in large part by the pervasive influence of artificial intelligence (AI). From reshaping deal structures to redefining the way companies evaluate potential targets, AI is creating both opportunities and challenges in an increasingly competitive market. This article explores the key insights from the latest industry developments, as discussed at the KPMG Tech M&A Conference, while offering actionable takeaways for growth-oriented entrepreneurs and mid-market company founders.
The AI Revolution in SaaS M&A: Market Context and Strategic Implications
Artificial intelligence is no longer just a buzzword; it is now a significant driver of deal activity in the SaaS space. According to insights shared at the conference, investors and acquirers are increasingly focused on how AI will impact businesses - both as a potential disruptor and as a tool to accelerate growth.
Entrepreneurs managing businesses generating $500K to $10M in annual revenue should pay close attention to these shifts. Whether you're looking to scale operations or prepare for a future exit, understanding how AI influences deal-making is essential. Let’s break down the key themes shaping the current SaaS M&A environment.
1. AI as a Double-Edged Sword in M&A
AI's potential to disrupt entire industries is both a risk and an opportunity. On one hand, the technology enables faster product development cycles - what once took years can now be accomplished in months. On the other hand, this rapid evolution creates uncertainty, as CEOs and founders must weigh the potential for their products to be rendered obsolete by new AI advancements.
Strategic Consideration: Build vs. Buy
For founders, the decision to build new capabilities in-house or pursue acquisitions is becoming increasingly urgent. AI-forward startups are attracting significant interest from investors and acquirers alike, but the frenzy can lead to inflated valuations and rushed decisions. Companies must carefully assess whether to invest in developing their own solutions or acquire talent and technology through M&A.
2. The Rise of Creative Deal Structures
The SaaS M&A space is seeing a rise in innovative deal structures designed to navigate valuation gaps and manage risk. Earnouts, in particular, are becoming a prominent feature of smaller transactions, with almost 47% of total consideration in deals under $50M now tied to performance-based payouts.
Key Takeaway: Balancing Risk and Reward
Earnouts can help bridge the gap between buyer and seller expectations, but they also introduce complexity into deal negotiations. Founders should prepare for extended negotiation periods and ensure earnout terms are realistic and achievable. Building trust and alignment with buyers is critical to maximizing the value of these structures.
3. Investor Behavior in AI-Focused Deals
At the KPMG conference, a recurring theme was the aggressive approach many venture capitalists (VCs) are taking toward investing in AI startups. Deals are being closed quickly, often with minimal due diligence and little to no governance rights. This competitive environment underscores the importance of careful evaluation for strategic acquirers.
Insight: Due Diligence in an AI Frenzy
For buyers, the challenge lies in identifying sustainable value amid the hype. Many AI companies are demonstrating "creative accounting" practices, such as counting short-term contracts as annual recurring revenue (ARR). Entrepreneurs looking to sell should prioritize transparent financial reporting and realistic growth projections to stand out in a crowded market.
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Lessons from Industry Leaders: Case Studies in Strategic M&A
To illustrate how top companies are approaching the current M&A environment, let’s examine the strategies of three leading SaaS firms: Salesforce, Atlassian, and Amplitude. These companies exemplify best practices in leveraging M&A to drive growth and innovation.
Salesforce: Acquiring AI Talent and Technology
Salesforce has been aggressively acquiring AI-forward startups to enhance its product offerings. Recent deals include:
- Dodie: An enterprise search platform designed to improve contextual queries.
- Spindle AI: A tool for business analytics and scenario planning.
- Appramore: A process mining platform focused on improving business workflows.
These acquisitions highlight Salesforce’s strategy of integrating cutting-edge AI capabilities into its existing ecosystem, allowing it to maintain a competitive edge in the enterprise SaaS market.
Atlassian: Targeting Strategic Innovation
Atlassian’s approach to M&A emphasizes acquiring complementary products and capabilities. Notable transactions include:
- The Browser Company: A $610M acquisition of a browser designed for productivity and focus.
- Cycle: A platform to streamline team workflows and product delivery.
This strategy reflects a clear focus on enhancing user experiences and expanding into adjacent markets.
Amplitude: Smaller, Impactful Acquisitions
Amplitude, while smaller in scale, has demonstrated strategic precision in its acquisitions:
- Command AI: A tool for simplifying user interactions through AI-driven insights.
- Craftful: A co-pilot platform designed to make smart home devices more accessible.
Amplitude’s targeted approach showcases how even smaller companies can use M&A to drive innovation without overextending resources.
Key Market Trends: What Founders Need to Know
The broader M&A landscape is also evolving in ways that directly impact mid-market business owners. Here are some data-backed trends to watch:
Increasing Deal Activity
Both deal count and deal value are on the rise in North America, reflecting a more favorable market environment for M&A. Regulatory conditions have loosened, and market dynamics are encouraging peer companies to engage in acquisitions.
Higher Multiples in B2B SaaS
Enterprise value (EV) multiples for B2B SaaS transactions are ticking upward, with 2025 averaging an 8.4x multiple compared to 7.9x in 2024. Entrepreneurs should be mindful of these valuations when positioning their businesses for sale.
Earnouts as a Growing Consideration
Earnouts are becoming a significant component of deal structures, particularly in smaller transactions. Founders should anticipate that a substantial portion of acquisition consideration may be performance-based, tied to revenue or profitability milestones.
Key Takeaways
- AI is Reshaping SaaS M&A: Founders must be prepared to address how AI could disrupt or enhance their businesses during due diligence.
- Creative Deal Structures Are the Norm: Earnouts and other flexible mechanisms are increasingly important in bridging valuation gaps.
- Transparent Financials Win Deals: Investors are scrutinizing accounting practices in AI startups - realistic ARR and growth metrics are essential.
- Build vs. Buy Decisions Are Critical: Understand whether to develop AI capabilities internally or acquire them through strategic M&A.
- Market Dynamics Favor Action: With deal activity and valuations rising, now is an opportune time to explore M&A opportunities.
- Learn from the Best: Study how companies like Salesforce, Atlassian, and Amplitude use acquisitions to drive growth and innovation.
Conclusion: Seizing Opportunities in a Transformative Market
The SaaS M&A landscape is at a pivotal moment, with AI acting as both a catalyst and a challenge for businesses of all sizes. Mid-market entrepreneurs have a unique opportunity to capitalize on these trends by positioning their companies as attractive acquisition targets or by pursuing strategic acquisitions to accelerate growth. By staying informed, addressing valuation dynamics, and embracing creative deal structures, founders can navigate this rapidly evolving environment with confidence.
In the end, successful M&A is about more than just closing the deal - it’s about creating long-term value. Whether you’re looking to buy, sell, or simply stay competitive, the insights from this transformative market are clear: the time to act is now.
Source: "E41: KPMG Tech M&A Conf & SaaS M&A Market Update" - Inorganic Podcast, YouTube, Nov 16, 2025 - https://www.youtube.com/watch?v=gqoWOoRfR7k
