What is a data room and why is it crucial for SaaS acquisitions?

A data room is, in its essence, a secure online platform used to share and manage confidential documents during due diligence processes, ensuring controlled access and streamlined deal execution.

In my opinion, there are three main reasons why a Virtual Data Room (VDR) is essential:

First, security and confidentiality. VDRs are usually encrypted with access control storage to protect sensitive financial, legal, and operational documents from unauthorized access or release.

Second, a VDR makes the M&A process more efficient by centralizing all due diligence materials in a structured format, enabling faster document retrieval, streamlined collaboration, and reduced deal friction.

And lastly, access control and tracking. They allow granular permission settings whereby you can track activities, create audit trails, and ensure that only authorized parties see the specific information needed for them.

Do you need a specialized platform for setting up a data room or is Google Drive good enough?

It’s a good start. It all has to do with dealing in good faith. As always, we sign an NDA with any given seller, which states clearly that we will not be sharing information with any third parties.

So you can send files over email or GDrive – it really doesn’t matter in the early stages. It gets a bit more serious when you start sharing really sensitive stuff like customer contracts, etc.

What are the essential folders for your SaaS data room?

For us initially, the two core items we look for are the financials, specifically the profit and loss statement, and secondly, the customer schedule, which captures your monthly movements of MRR by customer.

Once we progress to due diligence, we would normally have several key folders including:

1. Corporate legal documents that usually contain certificates of incorporation and bylaws, any shareholder agreements, the cap table, compliance and regulatory documents, if any.
   
2. Financials and accounting. If you have audited yearly reports, we’d be happy to see those, which include balance sheets on top of the P&L I mentioned.
   
3. Customer revenue data. At its core, those are customer invoices in their rawest form. Using those, we can calculate the revenues ourselves and see what’s what versus what the seller is telling us. In the same folder, it’s also really cool to see customer contracts and subscription agreements, especially for enterprise businesses.
   
4. Product and technology, which typically includes product roadmaps, development plans, tech stack overview, infrastructure documentation, and any policies or compliance documents the company has like GDPR, SOC 2, etc.
   
5. Sales and marketing – marketing campaign performance, customer acquisition costs, acquisition channels, partnerships and affiliate agreements, and stuff like that.
   
6. The last one would be legal and tax, which is typically carried out by third-party providers in our case, so that’s something we usually don’t touch.
   

Those would be the five folders I would say have to be there.

What are the common mistakes SaaS founders make with data rooms?

First of all, founders often don’t have a data room in the first place. The usual founder to whom we speak doesn’t have a data room because that’s usually something used by larger conglomerates that treat their information as super sensitive.

For us, some minor issues include incomplete or outdated documents. By incomplete, I mean you’re showing me the last 12 months of your profit and loss statement but it’s missing a month, for example. By simply not adding it, it essentially extends the due diligence timeframe, which drags things along and makes it more complex.

And outdated documents really aren’t relevant for us. If we ask for the last four years of your balance sheet and you give us your balance sheet for the last 15 years, it doesn’t bear any meaning for us.

Another topic that’s quite common is just having too much unnecessary information that buries the key insights and overwhelms potential buyers. Luckily, we have the experience to pinpoint which is the actually important stuff versus what’s irrelevant.

What are the best practices in setting up data rooms for SaaS M&A?

It’s really being able to react fast and actually have the necessary documentation. If a seller isn’t capable of showing us how they acquire leads or where they’re spending their marketing dollars, it gets tricky for us to dig deeper because there’s simply nothing to dig into.

Just having a relatively moderate selection of documents that explain your organization really helps accelerate the process as a whole.

Do we, at saas.group have any preferences towards the data that is presented and the tools that are used?

For us, number one is core financial statements, among which are the profit and loss and balance sheet. Usually, we go for the last three to four years.

Moving on, revenue and SaaS data. These are raw customer invoices accompanied by any subscription management tools that track your MRR movements on a monthly basis so we can compare them.

Lastly within the revenue and SaaS data would be customer contracts and subscription agreements. We just want to make sure those agreements are real and we can see they are signed, confirming you have actual customers.

At the same time, a budget and forecast from the selling party would be really important for us because then we can understand how they are planning to grow and by doing what exactly. They are justifying their growth rates or profitability rates by giving us assumptions and ideas about the next 12-24 months.

Besides financials, at later stages, we also ask for operational documents or legal documents. These are necessary not only for us but also for the legal and tax advisors. Those include sales pipeline and CRM data, product roadmaps, development roadmaps, tech stack infrastructure descriptions, support and SLA agreements if any, and employee and HR reports.

For legal, it’s the quite usual stuff like company incorporation and bylaws, shareholder agreements, NDAs and confidentiality, any historical litigation proceedings, IP ownership, and patents.

The sum collection of the company’s existence should be basically in a bunch of folders. But usually, these files are quite simplistic in their nature, being one or two pages long, just showing that what you’re saying is actually true based on X, Y, and Z documents.

How long does the data room review process take?

It really depends on the size of the company and the maturity of the company. For smaller companies, literally, five minutes does it. For larger organizations having sophisticated processes and sophisticated documentation, this might take a couple of days. So it really depends on the maturity of the company.

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Understanding the key terms and concepts of SaaS M&A is essential to having a lot more clarity starting the process. Here we break down the most important terms, with examples, so you can focus on making the best decisions for your SaaS business.

1. Valuation: what’s your SaaS worth?

Valuation is determining your company’s worth for the acquirer. For SaaS companies, this is often based on revenue multiples, growth rate, and profitability.

• Example: If your annual recurring revenue (ARR) is $2M and the average valuation revenue multiple in your industry is 5x, your company could be valued at $10M. It also could be valued at $2M. There are a lot of things going into the valuation process from risk assessment to analyzing the customer base,future growth potential and EBITDA margins. We always recommend doing your research about the market situation and average industry multiples, but also possibly involving an advisor who would provide you with a realistic view of the business. 

2. Types of Buyers: who’s acquiring you?

Understanding the type of buyer can help you anticipate their goals and approach. Here are some common buyer types and real-world scenarios to illustrate their intentions:

• Strategic buyers: These are often competitors or companies in your industry seeking synergies to enhance their existing offerings.
  • Example: When Salesforce acquired Slack for $27.7 billion, the goal was to integrate Slack’s collaboration tools with Salesforce’s CRM platform, creating a comprehensive suite for businesses.
    
• Private equity: Financial firms focused on optimizing your business for resale or growth, typically within a set investment horizon.
  • Example: Vista Equity Partners acquired Marketo and later sold it to Adobe, showing how private equity firms build value before exiting at a higher multiple.
    
• Serial acquirers: Companies like saas.group specialize in acquiring SaaS businesses to hold and grow. These buyers often have deep expertise in their domain, e.g. SaaS M&A, and prioritize seamless transitions and long-term growth.
  • Example: saas.group’s acquisition of Rewardful highlighted their approach to identifying untapped potential for future growth and in this case, leveraging the power of social media and proactive partnerships.

3. Letter of Intent (LOI): the starting point

The LOI outlines the initial terms of the deal, including valuation, deal structure, and key conditions. It’s not legally binding but sets the tone for negotiations.

• Tip: Review the LOI carefully and negotiate terms upfront to avoid surprises later. At saas.group we tend to treat the LOI as a handshake agreement and try not to change the terms of it further down the road unless some special cases arise during the due diligence process. And this is exactly why we recommend having most of the details of the deal clear even before signing the LOI. You can get away but it already means time away from business and lawyer fees, so coming to this with an understanding of what’s ahead is pretty important.

4. Due Diligence: the deep dive

This is the process where the acquirer examines your company’s financials, operations, and legal documents. During this phase, SaaS M&A due diligence often scrutinizes specific documents and metrics to assess the health and potential of your SaaS business. For example:

• Financial Records: Detailed P&L statements, balance sheets, and cash flow statements.
• Customer Metrics: Churn rates, customer lifetime value (CLTV), and monthly recurring revenue (MRR) trends.
• Contracts: Review of customer agreements, vendor contracts, and employee agreements to identify any risks or liabilities.
• Codebase and IP: Evaluation of your source code, patents, or intellectual property ownership.

It’s also your opportunity to assess the acquirer’s track record and vision. Due diligence goes both ways, and founders should think about doing theirs way before agreeing to go all-in with an acquirer to ensure a fit and shared values.

Example Questions to Ask the Acquirer:

• What’s your track record with acquisitions?
• How will this acquisition impact my team and customers?
• What specific metrics or milestones do you prioritize post-acquisition?

By preparing these documents and asking the right questions, you can ensure a smoother SaaS due diligence process and build trust with potential SaaS buyers.

5. Deal Structure: how will you get paid?

This refers to how the acquirer will pay you, and each structure has its own set of advantages and disadvantages for SaaS founders:

• Cash: Payment is made upfront in cash, providing immediate liquidity.
  • Advantage: Instant access to funds that can be reinvested or used for personal ventures.
  • Disadvantage: Potential tax implications and no future upside if the company grows post-acquisition. 

• Stock: You receive shares in the acquiring company, tying your payout to their future performance.
  • Advantage: Opportunity to benefit from the acquiring company’s growth.
  • Disadvantage: Risk of share value fluctuations and delayed access to cash.

• Earnout: A portion of the payment depends on achieving specific performance goals post-acquisition.
  • Advantage: Allows founders to demonstrate value and potentially earn more.
  • Disadvantage: Stressful if goals are unrealistic or factors outside your control impact performance.

Example: An acquirer offers $5M upfront and $2M in earnouts if your company hits a $1M ARR milestone in the next year. Understanding these structures helps SaaS founders evaluate the short- and long-term implications of offers in the acquisition process.

7. Holdback: keeping some skin in the game

A portion of the purchase price is held back until specific conditions are met, such as successful customer retention or revenue targets.

• Example: The acquirer withholds 10% of the payment for 12 months to ensure a smooth customer transition.

8. Purchase Agreement: The Final Contract

This legally binding document outlines the final terms of the acquisition, including price, payment terms, and warranties.

• Tip: Work with an experienced M&A lawyer to review the agreement thoroughly. No relative who has been helping you sell your house, no matter how nice, is super helpful here. You want someone who offers wealth of knowledge about the specific deal type and also a great deal of empathy to be on your side and humanize the process.

9. EBITDA

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a key metric to assess your company’s profitability.

• Example: If your revenue is $1M, and expenses (excluding interest, taxes, depreciation, and amortization) are $600K, your EBITDA is $400K.

10. Liquidation preferences: protecting investors

This determines how proceeds are distributed in the event of a sale. There are dozens of stories of deals where founders, unfortunately, ended up with nothing, or have gotten way less than they ever expected. In case you’ve raised investment for your SaaS company, understanding the investors’ preferences is a good way to avoid surprises. 

• Example: If investors have a 2x liquidation preference, they get twice their investment back before founders see any proceeds.

11. Sales Multiple: a valuation benchmark

This is the ratio of your company’s sale price to its revenue or EBITDA.

• Example: If your company sells for $10M and your revenue is $2M, the sales multiple is 5x. SaaS valuation often hinges on this metric.

Selling your SaaS business is a monumental step. By understanding these key SaaS M&A terms, you’ll be better equipped to navigate the SaaS acquisition process, ask the right questions, and ensure a deal that aligns with your goals. Remember, it’s not just about the money—it’s about finding the right partner to carry your vision forward. 

Check out our M&A course for sellers to learn more about the acquisition process, metrics used to determine company valuation, different types of due diligence, and determining the best fit with a potential buyer. 

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Founded in 2005, KingWebMaster’s main product, Advanced Shipping Manager, helps e-commerce businesses manage complex shipping calculations, such as multi-location shipments, dimensional shipping, LTL rates, shipping perishable items, and more.  Serving thousands of customers, through popular e-commerce platforms like Shopify and BigCommerce.

The acquisition of KingWebMaster marks saas.group’s 23rd successful acquisition and our eighth in North America.

Dan Rotem, CEO of KingWebMaster, commented, ”Becoming a brand of saas.group is a dream come true for the entire team at KingWebmaster.  For decades, we have been self-reliant and were blessed to reach all our goals with the hard work of our team.  Now, with the experience and expertise of saas.group we are looking at significantly upgrading our services.  Our merchants and subscribers are up for an incredible journey as we bring our company into the future!  We are very excited to join the saas.group family and look forward to working together”.

Tim Schumacher, Founding Partner at saas.group, commented, “Dan has created a great solution that solves large pain points for e-commerce customers with complex shipping needs. As our 23rd acquisition, we’re excited to help grow and accelerate this business, just like MJ took his game to the next level”.

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty-one companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 350 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, and Customer Experience and more.

saas.group was advised by OptimistLegal (Omeed Tabiei and John Rosenbaum), Techminers (Kamyar Paykhan) and Dr. Dirk Koehler as our General Counsel. KingWebMaster was advised by Cross Keys Capital (Michael Schuster, Alex Brennan) and Silverman Schermer (Adam Silverman)

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Key areas acquirers focus on

Accuracy and Completeness Acquirers will closely examine your financial statements for accuracy and completeness. They want to see that every number is backed up by solid records and that nothing important is missing. Messing this up could hurt your valuation and even cause buyers to walk away, so get it right to avoid giving a bad impression.

Consistency Buyers look for uniform accounting practices and principles. If your reporting varies significantly, it might raise concerns about financial stability or management practices. Certainly not the deal-breaker but it would make the life of a buyer significantly more difficult going through the reports that look nothing like they’ve seen before. It’s definitely not the smoothest path to streamlined collaboration! The clarity and documentation of your accounting policies and practices should align with industry standards and be consistently applied.

Current Performance Buyers are interested in how your company is performing right now—think revenue growth, profitability, and how you manage expenses. Show off your solid performance trends and strong financial metrics to give buyers a clear picture of your company’s current health and future potential. This is the part where you really have a chance to shine! Highlighting these can make your company more attractive and show a direction where value can be added with more resources and expertise.

Debt Obligations Expect acquirers to closely review your debt, including loans and credit lines. They need to understand how they affect your financial stability and future outlook. Make sure you have clear documentation of all debts and repayment schedules to ease any concerns.

Feasibility of Projections

We all know about the importance of clear, data-driven projections. In this case, buyers are interested in whether your future expectations are grounded in past performance and current market conditions. Seeing realistic, data-driven projections helps build confidence in your company’s future potential.

Pricing Strategy Impact Buyers will check how your pricing strategy impacts your revenue and profitability. Clearly explain how your pricing decisions drive financial performance to showcase the effectiveness of your approach.

Essential finance data sources for SaaS*

To keep track of the right data, focus on a few key sources each month:

Bookings Data This includes all executed contracts for your software and services. Accurate bookings data is vital for calculating sales efficiency metrics and understanding go-to-market effectiveness. Consider using CRM systems like HubSpot, Zendesk, or Pipeline CRM to track this data efficiently.

Financial Data This covers your SaaS P&L (income statement), balance sheet, and cash flow statement. The P&L shows profitability and expense management, the balance sheet gives a snapshot of financial stability, and the cash flow statement tracks money movement. Present these documents with clear breakdowns of revenues, expenses, assets, and liabilities, and make sure to address any common issues like incomplete asset lists or unrealistic projections.

HRIS / Payroll / People Data Since people are often the largest expense, tracking detailed employee and contractor data is crucial. This includes names, titles, departments, locations, employment status and wage rates. Accurate headcount tracking ensures proper expense reporting and helps integrate this data into financial forecasts. You will also need to prepare an extended version of this report for the HR due diligence part, so giving it a little extra time and attention might be a good idea.

Customer / Revenue Data Detailed customer and revenue data are essential for calculating retention metrics and understanding revenue health. This data supports the accurate calculation of key metrics like Monthly Recurring Revenue (MRR), Gross Revenue Retention (GRR), and Net Revenue Retention (NRR), which are vital for assessing growth and customer satisfaction. To track and manage this data effectively, you need comprehensive information including customer names, unique customer IDs, invoice numbers, invoice amounts, subscription start and end dates, and any adjustments or credits.

Several SaaS tools can help streamline this process. Paddle is a popular choice and not only automates data collection but also provides powerful analytics to help you make data-driven decisions and present a clear picture of your business’s revenue dynamics.

*see more in-depth breakdown here

Common Mistakes Founders Should Avoid

Financial reporting might not be rocket science, especially with all the tools and services available but there are still a few common mistakes we keep seeing from founders looking for an exit.

One big one is inaccurate financial reporting. This includes errors in figures or inconsistencies in reconciliation, which can significantly undermine credibility with potential buyers. Discrepancies between reported and actual figures can certainly lead to a loss of trust, potentially derailing negotiations or affecting valuation. This issue often arises from rushed reporting processes or inadequate attention to detail, underscoring the need for thorough reviews and accurate data handling.

Another frequent mistake is ignoring key SaaS metrics like Customer Acquisition Cost (CAC), Lifetime Value (LTV), CAC Payback Period and churn rate. Failing to present clear CAC and LTV figures might make it difficult for buyers to assess the effectiveness of your marketing and customer retention strategies. For the seller, this can easily result in missed opportunities to showcase the business’s true value and health. Inconsistent historical financial data and poor cash flow management can also be problematic. It can prompt questions about financial stability and poor cash flow management can indicate underlying issues with financial health.

Finally, not addressing revenue concentration risk—where a business relies heavily on a few customers or markets—can be a significant red flag. Buyers are wary of such risks, as they can impact long-term stability and profitability.

Conclusion

By understanding what acquirers focus on in financial due diligence, avoiding common pitfalls, and tracking essential finance data sources, you can present a compelling case for your SaaS company. Accurate reporting, consistent data, and clear insights into your financial health and projections are key to a successful exit. Focus on these aspects to ensure a smooth due diligence process and attract the right buyer for your SaaS business.

If our values speak to you and resonate with how you do business, get in touch. Discuss your options with our M&A team: Dirk Sahlmer k (dirk@saas.group) or Pavel Prokofiev, ACA vel (pavel@saas.group). Learn more about how we grow acquired brands on our blog and podcast pages.

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Founded in 2015, Timebutler operates in a large and growing market with ongoing regulatory changes, especially in the German-speaking DACH region. The company has achieved stable growth and now serves over 4,000 customers with more than 300,000 employees in various industries, including Sedo, the previous company of our Founding Partners Tim Schumacher and Ulrich Essmann.

The acquisition of Timebutler denotes saas.group’s 22nd successful acquisition and our seventh in the DACH region.

Juan Gil, Founder of Timebutler, commented, ”The sale of Timebutler marks an exciting milestone and the entire process with saas.group couldn’t have been smoother — always collaborative, always quick and always full of good energy. We share the same passion for innovation and customer-first thinking. For our amazing customers, this means significant benefits: with the vast expertise and expanded resources of saas.group, we will be able to offer an even better Timebutler and improved services in the future!”

Zoltan Bettenbuk, incoming Timebutler GM, commented, “We’re excited to bring Timebutler into saas.group’s growing portfolio, and I’m really looking forward to working with Juan and his team. They’ve built a great tool that’s already loved by many, and it will be a pleasure to keep improving it. We see a lot of opportunities to add even more value for users and strengthen Timebutler’s place among the top absence management tools in the world.”

Tim Schumacher, Founding Partner at saas.group, commented, “Timebutler is an exceptional product that was carefully crafted over many years with exceptional customer focus, and zero marketing, purely growing by word of mouth. This transaction, our 4th this year and 3rd in Germany, reflects saas.group’s growing reputation as a destination of choice for bootstrapped businesses through a founder-friendly M&A process”

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty-two companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 350 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, Customer Experience and more.

saas.group was advised by Luther (Dr. Jörgen Tielmann), BA Group (Neele Wehmeyer), Techminers (Jürgen Vogel) and Dr. Dirk Koehler as our General Counsel. Timebutler was advised by Dr. Joachim Distel.

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Founded in 2014, picdrop has built a platform that allows for pain-free and real-time collaboration between photographers and clients. Freeing up hours of post-shoot processing for freelancers and enabling businesses to store all their files in one place – no more hard drives, emails and shared drives in the office. The business has 160,000+ users, mostly across the DACH region and ranging from freelancers to tier-1 blue chip names including DAX listed businesses.

The acquisition of picdrop marks saas.group’s 21st successful acquisition and our sixth in the DACH region.

Andreas Chudowski, Co-CEO of picdrop, commented, ”We, the founders and our team, are absolutely thrilled to be part of the saas.group family. We were deeply impressed by the founder-friendly approach towards the future development of our company and product. After ten years of bootstrapping, we are now ready to benefit from the experience of the saas.group team and work together to ensure that even more photographers and brands will enjoy picdrop in the future.”

David Khalil, Partner at saas.group, commented, “Through product love and relentless dedication to customer satisfaction, Andreas, Uwe, Tobias, and their team have built picdrop into the online gallery software of choice for professional photographers in Germany, Austria and Switzerland. We are looking forward to support picdrop in expanding outside its core geographies.”

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty-one companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 350 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, and Customer Experience and more.

saas.group was advised by Luther (Dr. Jörgen Tielmann), BA Group (Neele Wehmeyer), Techminers (Kamyar Paykhan) and Dr. Dirk Koehler as our General Counsel. picdrop was advised by Dr. Schwarz-Schilling & Partners (Arno Nonnen, Dr. Ingo Hattendorf) and Seitz Partner (Dr. Daniel Grewe, Constanze Hartmann).

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INFOnline was founded in August 2002 as a spin-off from the IVW e.V. and provides cookieless and cross-domain data collection and metrics. INFOnline is a central contact for all questions relating to standardized website usage measurement in accordance with IVW and ÖWA specifications. The business has a strong and dedicated customer base across the DACH region, including most German-speaking content websites such as BILD, Der Spiegel, Kronen Zeitung und Der Standard.

The acquisition of INFOnline marks saas.group’s 20th successful acquisition and our fifth in the DACH region.

Lars Königsberg, CEO of INFOnline, commented, “We are very pleased about the partnership with saas.group. It will enable us to consistently pursue our growth strategy and significantly strengthen our market position in the field of digital audience measurement. The synergies with the saas.group will enable us to expand our product portfolio and further develop our services at the highest level.”

Tobias Schlottke, Founding Partner at saas.group, commented, “We see great potential in INFOnline and are convinced that we can sustainably promote the company’s transformation process and growth through our collaboration. Our shared vision is to establish INFOnline as a leading provider in the field of digital audience measurement and to set new standards in the industry.”

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs, the company has acquired twenty companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 300 team members across 30 countries globally, saas.group provides products across Online Marketing, HR, Dev Tools, and Customer Experience and more.

saas.group was advised by Luther (Dr. Jörgen Tielmann), BA Group (Neele Wehmeyer) and Dr. Dirk Koehler as our General Counsel. INFOnline was advised by Seitz Partner (Dr. Daniel Grewe, Constanze Hartmann) and Dr. Schwarz-Schilling & Partners (Volker Koellmann). 

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DeployHQ is beloved by thousands of customers worldwide and comes with rich features like zero downtime deployments, automatic deployments, and powerful integrations. DeployHQ was operated by Krystal who decided to sell to saas.group in order to focus on their core hosting business. The acquisition marks the start of a partnership between saas.group and Krystal. DeployHQ will continue to be hosted on the 100% renewable powered, ultra-fast Katapult hosting platform.

The acquisition of DeployHQ marks saas.group’s 19th successful acquisition and our first in the UK.

Simon Blackler, CEO of Krystal, commented, “When looking for a secure new home for DeployHQ, saas.group was the obvious choice. It’s been a pleasure to get to know their enthusiastic and knowledgeable team and work on plans for the future of DeployHQ together. We’re also thrilled that DeployHQ will remain hosted on Katapult and look forward to future partnership with saas.group.”

Facundo Farias, MD – Deployment Tools at saas.group, “We had been following DeployHQ for some time so we’re delighted to announce that we’ve joined forces with them. This is going to significantly enhance our deployment tools, making them even more solid and effective. But there’s more! Our partnership with Krystal is another reason to celebrate. This collaboration gives us an excellent chance to enhance our sustainability efforts, driving us towards a greener and more eco-friendly future. We’re so excited about what we can achieve together”

Tobias Schlottke, Co-Founder & CTO at saas.group, commented, “Through adding DeployHQ to our portfolio, we’re combining visions for the future. This move allows us to leverage the strengths of both platforms, ensuring that DeployHQ’s product, identity, and values remain intact and receive further investment. We’re excited about this merger because it means more than just business growth—it’s about enriching the ecosystem with robust features and continuous innovation. Our plan is to significantly invest in the development of DeployHQ, enhancing its capabilities while preserving the product & identity that users have come to trust. This strategic decision underscores saas.group’s dedication to nurturing and expanding our portfolio with a long-term perspective.”

saas.group acquires promising SaaS companies with a founder-friendly process in order to elevate their product – and their people – to the next level. Founded in 2017 by serial tech entrepreneurs (Tim Schumacher, Ulrich Essmann, and Tobias Schlottke), the company has acquired eighteen companies to date, including Beekast, Crosstalent, Tower, Rewardful, Prerender, Juicer and Seobility. With over 250 team members across 30 countries globally, saas.group provides products across Sales & Marketing, HR, Dev Tools, and eCommerce verticals.

saas.group was advised by London Law Collective (David Farquharson). Krystal was advised by Steele Raymond LLP Solicitors (Zaeem Mughal).

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But what does the process of acquisition look like? We talked with Daniel Thulfaut, Head of Product Growth at saas.group to shed some light on the nuances of product due diligence. With years of experience leading product teams and overseeing acquisitions of B2B SaaS businesses, Daniel walks us through the critical factors evaluated during acquisitions, and the strategies ensuring a seamless transition for acquired teams.

1. What is product due diligence?

Product due diligence is our chance to vet a potential acquisition and make sure it fits into our family of brands and that we have the right resources to make it successful. During a DD we need to come up with hypotheses about potential quick wins, strategic pivots, and missing best practices that we can turn to. It also gives us a head start to expand the central team with the necessary resources, so we have all the support needed ready at the time of acquisition.

2. Are there any deal breakers on the product side of due diligence?

Very few, honestly. The level of product and product org maturity will eventually reflect in the acquisition price – which might mean becoming a financial deal breaker. From my perspective, real red flags are when the product itself does not fit into our existing portfolio at all and we don’t have the expertise to contribute. That is why we try to stay clear of B2C applications and hardware products, for example. We can do what we do because we have very specialized knowledge in the B2B SaaS space and can quickly impact these brands.

3. What’s the first thing you start evaluating when it comes to product due diligence?

The very first thing is to go through the product experience myself – especially the onboarding. This sometimes involves posing as a mystery shopper and going through the official sales cycle.

After decades of experience, we can pinpoint the major product issues, and most often even the history and development process behind them, just by using the product with fresh eyes from a user’s perspective. Interestingly, onboarding is also mostly the first thing we push to work with after the acquisition, with the highest potential to fix both conversion rate and churn issues.

4. How does the product team get involved after the acquisition? Do you start by making some drastic changes?

We usually try to avoid pushing changes very aggressively. During a DD we don’t have access to the full team. I believe a DD gives us a hypothesis to improve a business and a product. But we still owe it to the team to hear them out, view it from their perspective, and understand all the nitty gritty details before suggesting specific changes.

That is why we repeat the DD process in more detail and include the brand team in it. While we can often put our finger deadeye into the biggest wound, there is still an ivory tower effect in place, and we don’t want to take away responsibility and ownership from the team. That said, there are certain best practices that we want to see lived by every brand. If those are not present, we bake those changes and a reasonable timeframe into the acquisition contract.

5. 2023 has been about profitability and efficiency. Can we cut costs on the product side? What are the best practices we use?

If we look at a typical acquisition suspect, most of the teams see a lack of critical resources like product design, product analytics, or sometimes even a product manager owning the product experience. We don’t recommend cheaping out on these roles. Luckily, we run a very efficient central organisation that can lend these resources part-time to the brands to achieve a pragmatic, cost-efficient working model.

The two things we mostly recommend are:

First, revamp the pricing model and increase prices. This is the biggest lever SaaS companies have and also the most underutilized.

For a longer-term effect, we propose to find a more focused approach to product development and even sunset some existing features and product parts. Removing already developed features might sound counterintuitive, but this reduces technical debt and UI clutter and frees up development resources to be spent on something more impactful.

6. What are the most important questions you ask during the dd process?

Essentially, we ask the same questions we regularly ask in our quarterly product reviews. What have you recently shipped, and how did you decide if it was a success? What are you planning for the next cycle, and why are those the obvious roadmap items given the strategic analysis and product vision? In a DD, we dig a little deeper and let the brand walk us through the full process, from idea to release, and also explain the pricing model and the “data science” behind to us.

7. Do you evaluate the product team skillset during the dd?

Absolutely we do! But unfortunately, for the most part, it will be an educated guess based on results and performance since we don’t have direct access to the team. If for example, we find a very incoherent user interface with a clear lack of love for micro-interactions and guiding users, we can assume that the product designer on the team is rather junior (or nonexistent) or that the product org is not set up to include product design in the right touch points to allow for a better experience. Besides those giveaways, we also look at CVs and profiles on LinkedIn and ratios of PMs to developers and designers.

8. What would you recommend to the founders for an easier transition after the acquisition, product-wise?

The real magic happens when founders and acquired teams are open to suggestions and really want to use joining saas.group as a way to take their product to the next level. We have central teams with decades of experience in their fields and facilitated communities of practices to learn from each other. We have a genuine interest in seeing our brands flourish and be a part of their journey into the future. Very few startups and companies actually have access to that kind of talent and knowledge pool – embrace it and welcome us as your extended team and workbench!

Product due diligence in SaaS acquisitions identifies growth opportunities, and ensures compatibility and seamless integration for acquired teams at saas.group. By leveraging central resources and expertise, founders and acquired teams can navigate the transition seamlessly while focusing on efficiency and profitability. Ultimately, product due diligence not only assesses potential but also establishes a successful partnership and growth within saas.group‘s ecosystem.

If our values speak to you and resonate with how you do business, get in touch. Discuss your options with our M&A team: Dirk (dirk@saas.group) or Pavel (pavel@saas.group). Learn more about how we grow acquired brands on our blog and podcast pages.

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