Interesting perspective from @Villispeaks on the slow pace of M&A in SaaS companies. He argues that the playbook for acquisition of software companies which has driven M&A over the last decade or so, ie driving out costs and acheiving greater scale in distribution, does not apply for SaaS. On this thesis SaaS companies will have to aim for an IPO, rather than hoping for M&A to create liquidity, with implications for venture investors in terms of the greater amounts of money required and the longer time to exit. Great opportunities for PE investors though, as there will be a greater demand for buyouts.
The general consensus is that the SaaS ecosystem will eventually begin to consolidate. And yet, we have seen very little evidence of it happening. Software M&A has been very tame over the past few years. Part of the reason may be the high valuations in the private markets. Part of the reason may be that the acquirers have become rather concentrated themselves. And part of it may be that something fundamental has changed.