Software M&A is on pace for its second busiest year, but one deal distorts everything
Software M&A is technically tracking toward its second busiest year on record. The asterisk is significant: SpaceX’s $60 billion acquisition of Cursor accounts for half the annualized deal value. Pull that one transaction out and total dollars fall near a decade low.
Growth beats margins past 25%
If you’re deciding whether to push for another point of growth or another point of margin, Kroll’s data gives a clear answer. Companies growing above 20% trade at 7.2x revenue. Companies growing 10 to 20% trade at 4.1x. The gap is real and consistent.
The margin side of the Rule of 40 equation is weaker. Margin gains past 25% barely move the valuation multiple. Buyers are pricing growth, not efficiency above a certain floor.
Category framing moves multiples as much as fundamentals
Engineering software and HCM companies share a 46% Rule of 40 score yet trade at 5.2x and 3.0x respectively. Same performance metric, very different price. Category positioning carries real dollar weight in how acquirers and public market investors frame value.
For founders thinking about how to position their business for an eventual exit, the Kroll data suggests category framing deserves as much attention as the underlying financials.
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