M&A hit record highs last year. But like so many things in the AI Age, the benefits were not evenly distributed. For Plain Vanilla SaaS? PE has checked out.
There’s a tough topic that it’s time to be honest about in 2026: PE is no longer coming to the rescue for your average B2B / SaaS startup at $20m+ ARR. And until 2023, you could pretty much count on them doing just that.
The macro M&A numbers look incredible.
- 2025 saw $587 billion in technology M&A volume—the highest in a decade.
- PE buyout activity hit quarterly records.
- Megadeals kept flowing: Wiz at $32B, Scale AI at $14.3B, Armis at $7.75B.
- The leaders (Thoma Bravo, Vista, etc.) kept deploying and are still doing big deals
If you only looked at the headlines, you’d think every B2B founder with decent metrics was fielding PE term sheets.
They’re not.
And understanding why changes how you should think about your B2B company in 2026.
The PE Playbook That Worked for a Decade
From roughly 2012-2023, there was an almost mechanical formula:
Hit $20M+ ARR. Show 110%+ NRR. Don’t burn too much cash. Grow at least 20% annually. It didn’t need to be 100%+.
Do those four things, and you’d get an offer from one, two, maybe three PE firms. The multiples varied—anywhere from 4x to 10x ARR—but they were often surprisingly attractive.
The PE thesis was simple: buy a player with solid retention, either let it compound quietly or merge it into a portfolio company for scale, then take it public or sell it later at a much higher price. NRR was the magic number. If customers stuck around and expanded, PE could model the returns.
This created a safety net that shaped an entire generation of SaaS company-building. You didn’t need to be a rocket ship. You didn’t need to be the category winner. You just needed to be good enough—and PE would show up with an exit.
That safety net is gone.
Even worse, with the SaaS crash of 2026, the underlying debt markets are under large stress at the moment:
What Changed: The 2025 Bifurcation. Megadeals Up. The Rest? Down -17%
The 2025 M&A data tells a story of extreme concentration. In Q1 alone, five megadeals drove nearly half of all transaction value. Strip out those five, and average deal sizes actually dropped 17%. PE is still doing deals—record numbers of deals, in fact—but they’re hunting very different prey.
What PE is buying in 2025-2026:
- AI-accelerated growth stories. If AI is genuinely reigniting your growth—not just marketing fluff, but real acceleration in the numbers—PE gets excited. They can model the upside. They can see a thesis beyond “steady compounder.”
- Hot sectors with secular tailwinds. Security. Certain parts of fintech. Infrastructure plays that benefit from AI workloads. If you’re in a category where the market itself is expanding, PE can pay up because the rising tide lifts their returns.
- Consolidation plays at real scale. PE is still happy to buy a $100M+ ARR player they can merge into an existing portfolio company. But the sub-$50M ARR tuck-in? That math has gotten much harder.
What PE has checked out on:
Plain Vanilla SaaS. Good retention. Okay growth. Solid but uninspiring unit economics. No clear AI angle. No hot category tailwind.
Five years ago, that was a $200M exit at 6x ARR. Today? Crickets.
Why This Happened
Three forces converged:
The rate environment hurt the multiple math. PE firms borrowed aggressively to fund deals when rates were zero. At 5%+, the cost of capital fundamentally changes what they can pay. A steady 20%-growth SaaS company doesn’t pencil when your hurdle rate jumped 500 basis points.
The growth bar reset. After watching AI companies put up 100%+ growth rates, PE’s definition of “exciting” changed. Why buy a 20% grower when you can hunt for something that might 3x with the AI tailwind?
The exit environment got harder. PE ultimately needs exits—either IPOs or sales to strategics. With only 6 pure-play software IPOs in all of 2025, that exit path narrowed. And strategic acquirers are being more selective too. PE can’t pay 8x ARR if they’re not confident they can exit at 10x+.
What This Means for Founders
If you’re running a solid-but-not-spectacular SaaS company in 2026, the honest truth is: your grind just got harder.
The PE escape hatch is closed for most. You can’t build to $20M ARR or even $200M ARR and assume someone will buy you. That floor is gone. You need to build a company that can stand on its own—or has a genuinely compelling strategic angle.
Growth is currency again. For a few years, we lived in a world where “efficient growth” could substitute for actual growth. That tradeoff is less attractive now. Buyers—PE and strategic—want to see acceleration, not just stability.
AI isn’t optional. You don’t need to become an AI company. But if you can’t articulate how AI makes your customers more successful, or how it accelerates your own growth trajectory, you’ve got a narrative problem with every acquirer in the market.
The IPO alternative is shrinking, not expanding. The era of $100B+ private companies means the best companies aren’t going public—they’re staying private with growth equity. The IPO window isn’t opening for good-but-not-great companies. It’s barely opening for anyone.
The Path Forward
None of this means you should panic. It means you should be clear-eyed.
If you’re building a sustainable, profitable B2B company that throws off cash, that’s a great business. It’s just not clear a business PE is going to buy at a premium anymore. Own that. Build for durability, not exit optionality.
If you want to be acquirable at attractive multiples, you need one of three things: genuine AI-driven acceleration, presence in a hot category, or enough scale ($75M+ ARR) to matter in consolidation plays.
And if you’re somewhere in between—too big to be satisfied with lifestyle economics, too small and slow-growing to attract PE—you’ve got to make a choice. Invest aggressively to accelerate growth, or right-size your cost structure for indefinite independence.
The middle ground that PE used to occupy? The “exit to a PE firm at 5x-8x ARR” outcome?
That’s gone for 90% of us. It’s a big bummer, but there’s no use looking back.
The sooner we’re honest about it, the better decisions we’ll make.
M&A is on fire. But PE isn’t buying good. They’re buying great—or at least, AI-adjacent. Act accordingly.
