Tech M&A Trends Report – 2025

This year at Flippa, despite industry challenges, we’ve exited 32% more deals and had a record year. So what’s up? Well, Average Transaction Value was down 33% to $335,000. Such an interesting year. 

Accordingly, we’ve tapped some SME experts, those who are prolific M&A participants. They have been there and done that. Ultimately, there’s little commentary on main street and lower middle market M&A so we’ve asked Codie Sanchez of Contrarian Thinking (who has just published a new book) as well as Tim Schumacher from the SaaS Group, Mike Finger from Exit Oasis, Mario Peshev from DevriX, Ali Aydar CEO Sporcle and Paolo DiVincenzo from Inorganic. All operate in this space and all are active buyers in this segment.

The tech and digital industries are preparing for a dynamic M&A landscape in 2025. Driven by factors like AI innovations, shifting financing options, and changing buyer behaviors, the market is poised for both opportunities and challenges. This report provides a comprehensive outlook on the M&A environment, incorporating expert perspectives, key statistics from industry leaders, and additional insights drawn from the broader market.

M&A Markets Overview

The M&A market for tech and digital businesses is expected to see significant movement in 2025, influenced by increasing buyer selectivity and easing financing conditions. Ali Aydar recently acquired TypingTest from Flippa.com. The cross-border deal gives Ali substantial operating leverage across a new mass trafficked asset and according to Ali Aydar, CEO Sporcle.com, 2025 could be a banner year, with ample financing options and high-quality cash-ready buyers in the market. Buyers are discerning, placing greater emphasis on consistency, sound financials, and sustainability, unlike the speculative interest seen in the tech boom of 2021.

Codie Sanchez, author of Main Street Millionaire, adds that while North American buyers remain dominant, particularly in the acquisition of profitable, durable online businesses, there is an increase in interest from new business buyers, especially digital natives. These younger buyers are keen to acquire reliable assets that provide steady returns, particularly in a more deregulated environment that encourages transactional activity.

Interest Rates

Interest rates directly influence financing costs, making them a significant factor in both the broader economy and digital M&A. In a low-interest-rate environment, companies and private equity firms often take advantage of cheap capital to acquire digital businesses. Conversely, rising rates increase the cost of financing acquisitions, potentially slowing M&A activity.

Trump Being Elected

Donald Trump’s pro-business stance during his first term fostered optimism among investors, resulting in tax cuts and deregulation that boosted corporate earnings and M&A activity. Should Trump return to office, markets may anticipate similar policies, which could spur another wave of M&A, especially in sectors like technology and digital businesses that benefited from tax incentives and favorable regulations under his administration.

S&P 500

The S&P 500 reflects investor confidence and economic trends, including the impact of political leadership and interest rates. During Trump’s presidency, the S&P 500 experienced strong growth, partly due to market-friendly policies. These same dynamics often shape the valuation of digital businesses, as high market confidence can elevate deal sizes and activity in digital M&A.

Why Do These Matter for M&A Markets?

In the digital business sector, interest rates, political shifts, and market trends are pivotal. The appetite for acquiring online businesses—like SaaS companies, e-commerce stores, and digital platforms—fluctuates based on:

• Financing Conditions: Lower interest rates encourage borrowing to fund acquisitions.
• Policy Environment: A pro-business administration might incentivize technology investments, sparking acquisitions in AI, blockchain, or digital marketplaces.
• Market Valuations: A rising S&P 500 often correlates with higher valuations for digital companies, making M&A deals more lucrative for sellers and competitive for buyers.

Digital M&A has grown significantly in recent years as businesses seek to acquire established digital assets rather than building from scratch. Current interest rate policies and political leadership will continue to shape this trend, influencing valuations, deal flow, and investor behavior.

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Key M&A Industry Trends in 2025

1. AI-Driven Acquisitions

AI continues to shape the tech M&A landscape. Tim Schumacher, CEO of SaaS Group, points out that AI is driving significant growth, but buyers are increasingly cautious. AI has led to a surge in interest but also brought churn, and buyers are prioritizing profitability and long-term sustainability over hypergrowth. SaaS Group, for instance, focuses on acquiring companies with high Net Dollar Retention (NDR) of over 85-90%, which reflects strong customer loyalty and value creation.

Paolo DiVincenzo from Inorganic echoes this sentiment, noting that the rapid evolution of AI has caused many buyers to adopt a “wait-and-see” approach. Technical roadmaps have been disrupted by AI, and companies are reassessing how bolt-on acquisitions can fit into their long-term strategies. This caution is contributing to extended negotiation periods and an increased reliance on earn-outs and other risk mitigation strategies.

AI’s influence is further evidenced by data from the Mergermarket report, which highlights that AI-driven acquisitions accounted for over 30% of all tech M&A transactions in 2024, up from 20% in 2023. This increase is attributed to the rapid adoption of AI technologies across industries, which has prompted companies to either acquire AI capabilities or risk being left behind. However, the focus remains on established AI companies with proven profitability, as speculative startups are seen as too risky.

2. Improving Market Dynamics

The small business M&A sector remains strong, with a surplus of capital chasing high-quality opportunities. Buyers are motivated, but they are scrutinizing every detail—they are looking for established businesses with predictable cash flows and replicable models. Deals are getting done, but only for businesses that meet stringent quality standards.

Mike Finger from Exit Oasis provides a critical perspective on the market. He emphasizes that regardless of macroeconomic conditions, the success of a sale largely depends on the readiness of the business. Owners prepared to do the necessary work to make their business attractive will find opportunities, regardless of market headwinds or tailwinds.

Mario Peshev, CEO of Devrix, who has acquired 52 digital businesses with Flippa thinks the dynamics will be positive for the market as a whole.

“The massive market crunch starting in late 2022 pushed many businesses into alignment by mid-2023. With fewer macro surprises, improving investor confidence, and recent interest rate cuts, buyers are in a stronger position heading into 2025.”

In a report by PitchBook, and practically every other market update report in 2024, it’s been noted that private equity firms have amassed significant “dry powder”—capital waiting to be deployed—which has increased competition for high-quality assets. This has led to higher valuations for companies that meet buyers’ criteria, particularly those with stable revenue in what has been a very challenging operating climate.

The attached chart on buyer search demand on Flippa shows enormous interest across the board but it also highlights a substantial return in interest for eCommerce acquisitions. Keywords related to eCommerce, such as “Shopify” and “Ecommerce,” show significant search volumes, suggesting a renewed focus on acquiring eCommerce businesses. “Shopify” leads the list with over 16,000 enquiries in just the last 3 months, while other eCommerce-related keywords, like “Ecommerce” itself, also feature prominently. This surge in interest could be attributed to Shopify’s outstanding results over the last quarter, which have likely renewed buyer confidence in the scalability and profitability of eCommerce ventures. Ecommerce is back! Simply, odd that some said it was dead post 2022. What!?

3. Easing Financing Environment

Ali Aydar predicts that the loosening of financing options, coupled with a more business-friendly administration in the United States, will lead to a rise in deal activity. Lower interest rates will make it easier for buyers to access capital, leading to increased competition for high-quality businesses. This presents a unique opportunity for sellers to command higher valuations if their businesses meet the rigorous criteria set by today’s buyers.

With favorable interest rates, stabilizing inflation, and record dry powder, deal activity is set to increase compared to prior years. The Fed’s rate cuts in September and November are expected to catalyze M&A activity by lowering borrowing costs and driving demand. Financial markets predict a 70% chance of a further rate cut this month, bringing the policy rate to 4.25%-4.50%, with two more cuts expected next year, albeit at a slower pace than earlier projected.

Contributors’ Full Perspectives

We asked some SME experts, those who are prolific M&A participants, for their perspectives on the past 12 months and how they see 2025 playing out. They all have a wealth of knowledge and insights to share into the current main street and lower middle market M&A market.

Codie Sanchez – Contrarian Thinking

Codie Sanchez provides an optimistic view of the M&A environment, particularly for online business owners. Buyer demand is intense but selective, focusing on durable and profitable businesses. She highlights the rise of a new generation of business owners—”Silver Surfers”—looking to retire and capitalize on their profitable ventures, making Flippa an ideal platform for them. However, Sanchez advises buyers to prioritize fundamentals over hype in the marketplace.

Codie’s perspective

The market is convinced that Trump’s pro-business bravado mixed with Elon’s “apex disruptor” ethos will be a formula for boom times.

But don’t break out the champagne just yet. For those looking to buy and sell online businesses, here’s my take:

On Buyer Demand: Intense but selective. In October, relative Google search interest for “how to buy an online business” was the highest on record. Since September, our BizScout marketplace has onboarded almost 50,000 business buyers. Across the board, there’s strong interest in reliable, profitable online and “boring” Main Street businesses, wherever returns are steady and secure. But if they’re not, there is very little demand.

On Owners Exiting: Now’s a good time. There’s a rising generation of digital natives, of which 50% want to own a business. There’s also an aging generation of owners, of which more than half are 55+ years old. Don’t be surprised to see older owners of website businesses—“Silver Surfers” as we call them—gear up for retirement. So long as their businesses are profitable and durable, they’ll fetch premium valuations. Flippa is perfect for them.

Policies: Expect fewer—and leaner. With deregulation now on the horizon, buyers and sellers alike are primed to act. Case in point: Goldman now predicts a 20% increase in M&A activity in 2025. To put it another way, the M&A markets just had a double shot of espresso.

So, yes, the market’s caffeinated. But remember: not all that glitters is gold. With website businesses, make sure to buy the fundamentals, not the frenzy. Buy smart, or don’t buy at all.

Bio: Codie Sanchez

Codie Sanchez is the author of the new bestselling book on how to buy businesses, Main Street Millionaire. She is the founder and CEO of Contrarian Thinking, a financial education company with over six million followers. Sanchez owns many Main Street businesses, including car washes, laundromats, and roofing, painting, and handyman companies. Learn more at ContrarianThinking.co.

Tim Schumacher – SaaS Group

Tim Schumacher discusses how AI is a double-edged sword in the current M&A market. While it has led to a surge in buyer interest, it has also brought complexities such as churn and inflated growth metrics. SaaS Group’s acquisition strategy centers on sustainable businesses with a strong NDR, avoiding speculative AI startups that prioritize rapid growth over profitability. He also advises founders to prepare early and adjust their expectations to align with the current market dynamics.

Tim’s perspective

2025 is shaping up to be quite an interesting year for M&A. With AI driving growth, acquirers (including us at saas.group), are more cautious, focusing heavily on sustainability and long-term profitability. What we’ve seen so far on the market this year:

The Rule of 40: Founders are starting to look more closely into the Rule of 40, balancing growth with profitability. While growth remains crucial, AI innovations attracting a lot of new customers also bring quite a bit of churn which founders are yet to tackle. Value creation is the key here and serial acquirers remain focused on long-term strategies.

Net Dollar Retention: For us at saas.group, Net Dollar Retention (NDR) is probably the single most important metric to evaluate how much true value customers see in a product, and thus attractiveness of the company. We prefer companies with an NDR of over 85-90%, reflecting efficient capital usage and strong customer retention. We see it as a clear indicator of a company’s ability to sustain growth and profitability.

Steady interest but slower closures: The level of interest from founders about exiting their companies is pretty much at the level of 2023. However, with the rise of AI, increasing expectations, and speculations about possible interest cuts, negotiations and decisions are certainly taking longer which results in fewer closed deals overall in the industry.

AI-driven acquisitions: The AI boom has led to a surge in deals but at saas.group, we prioritize long-term strategies over quick wins which a lot of strategic acquisitions of AI tools have been about. As we focus more on great tools that have established themselves on the market, we’re very bullish on accelerating existing companies’ growth with AI but not yet buying the new ones where growth is clearly taking over profitability and the net dollar retention sometimes is only in the low teens.

Recommendations for founders: Due diligence is a two-way street. Thoroughly vet potential buyers to ensure financial stability, cultural alignment, and understanding of the business you’re building. We always recommend founders to reach out to the companies that have already sold to your potential buyers to learn first-hand what the process would look like. And if they refuse to talk to you, there’s your red flag.

Prepare early: Start exit preparations early, streamline operations, and identify growth opportunities (by the way, the saas.wtf newsletter by Dirk Sahlmer, our Head of Origination at saas.group, is a great resource for that, and we’ve got a new free SaaS M&A course coming).

Adjust expectations: Align your price expectations with the current market reality, and be ready for extended negotiation periods.

Bio: Tim Schumacher

Tim Schumacher CEO SaaS Group. Tim is the CEO and Co-Founder of SaaS Group and was previously the Co-Founder of Sedo, the world’s leading marketplace for domain names. An experienced entrepreneur and investor, Tim has a strong focus on scaling SaaS companies and fostering sustainable growth. After the successful exit of Sedo, he founded SaaS Group to support and acquire promising SaaS businesses, emphasizing long-term profitability and operational efficiency. 

Mike Finger – Exit Oasis

Mike Finger offers a pragmatic view, suggesting that the success of buying or selling a business depends more on internal readiness than external conditions. According to Finger, macroeconomic factors do not dictate the success of a deal; instead, a well-prepared, stable business can thrive in nearly any market environment. He encourages sellers to take control of their situation and not wait for the “perfect” market to act.

Mike’s perspective

What does the buy/sell-a-business market look like right now?

It’s an interesting question and one that always entices those who are active in the marketplace.

But . . . should it?

There have been, of course, times where outside variables like interest rates, or macro-economic issues create defining headwinds or tailwinds for buyers and sellers. Sometimes those forces dictate the buy/sell environment. But those “macro defining” times are relatively rare . . . usually . . . the big stuff just doesn’t make that much difference.

And ultimately that’s good news for you – because the true answer to the “how’s the market” question is . . . you get to decide.

I always worry when an owner asks, “Is now a good time to sell my business?” Because that implies that they believe it’s the market’s health that will determine a successful sale. When 99% of the time it’s the state of the business that will determine the success or failure of a sale.

Same applies to those who ask, “Is now a good time to buy a business?” If you are prepared, properly experienced, appropriately financed and committed . . . you can almost always find a good business to buy.

So, what does the buy/sell-a-business market look like right now?

It depends on who is asking, what they want, and what they are willing to do to create a successful outcome.

Bottom line, the market almost always looks great for those who are ready and willing to do the work required to get a deal done.

Bio: Mike Finger

Mike Finger is the Founder of Exit Oasis, helping small business owners prepare for successful exits. With deep entrepreneurial experience, Mike offers practical insights and resources to make business exits accessible and achievable, focusing on readiness and value enhancement.

Ali Aydar – Sporcle.com

Ali Aydar is optimistic about 2025, anticipating a banner year for high-quality deals. He emphasizes the importance of revenue consistency, repeatability, and solid financials for any business seeking a buyer. Aydar also notes that access to capital is improving, which will provide a boost to M&A activity, particularly for those businesses that meet the high standards required by discerning investors.

Ali’s perspective

Deals are absolutely happening in today’s market. With a surplus of capital seeking high-quality investments, there is strong demand for businesses that demonstrate consistent, reliable cash flows. Buyers are motivated, and when solid opportunities present themselves, deals are getting done. However, today’s market requires more than just a good concept or growth potential; quality is paramount.

This isn’t a repeat of 1999 or 2021 when nearly anything with “.com” or “SaaS” in its name could attract buyers. In 2024, buyers are much more discerning. They’re looking for businesses that meet rigorous standards, such as:

Longevity: Businesses with a track record carry much more weight.

Revenue Consistency: A reliable cash flow with no major fluctuations is essential.

Repeatability: The business model should be replicable and sustainable.

Sound Financials: Clear, organized financials are non-negotiable.

While these qualities have always been important, they are crucial now as buyers weigh investments more carefully, particularly in a post-zero-interest-rate environment where discerning investment choices have taken center stage.

The Financing Landscape: One major shift we’re seeing in 2024 is a loosening in financing options, following a restrictive period in 2022-2023. The financing environment is easing, with investors actively looking to deploy capital, and we’re seeing indications that access to capital will continue to improve. Lower interest rates and a business-friendly federal administration (in the United States) in 2025 are setting the stage for a favorable financing landscape.

Looking Ahead: 2025 as a Banner Year for M&A: Given these factors, 2025 is shaping up to be a standout year for M&A. With ample financing options and high-quality buyers in the market, I anticipate robust activity centered on top-quality businesses. We’re moving beyond the low-quality deals of 2021 and the capital restrictions of recent years. Instead, 2025 will likely be characterized by the closing of high-quality deals, driven by well-capitalized, discerning buyers. This is a promising outlook for the small business M&A market, where quality and sustainable growth take precedence.

Bio: Ali Aydar

Ali Aydar is the CEO of Sporcle, a leading platform for online trivia and quizzes. Previously, he was the Sr. Director of Technology at Napster, where he played a key role in pioneering digital music sharing. With a strong background in tech and digital entertainment, Ali has grown Sporcle into a popular destination for trivia enthusiasts worldwide. He is passionate about creating engaging, educational content and has extensive experience in scaling digital platforms for sustainable growth.

Paolo DiVincenzo – Inorganic

Paolo DiVincenzo explains the cautious buyer behavior prevalent in the software M&A market. He highlights that, while buyer interest is high, transactions are slow due to perceived risks, particularly around AI integration and business sustainability. Startups must set realistic price expectations, be prepared for long negotiations, and provide assurances to buyers, such as earn-outs, to navigate the current market dynamics successfully.

Paolo’s perspective

For context, Inorganic is a platform that is mostly used by software startups looking for strategic acquirers. We’ve seen a steady increase in buyer interest in the second half of 2024.

Although transactions have increased somewhat in the same period, they have not increased to the same extent as interest.

We think this is due to three factors:

It’s still a buyer’s market, and casual buyers are showing up to see if they can get a bargain. There’s a lot of, “If you don’t find a buyer let us know and we might be able to figure something out.”

There’s still a heightened sense of risk in the software market, and buyers are exercising caution. Negotiations are taking longer, terms include earn-outs and other forms of deferred consideration, and deals have a higher risk of getting squashed when they go to the Board.

Technical roadmaps have been upended by AI, so there is some internal reshuffling taking place before companies decide what kinds of bolt-on acquisitions make sense.

We expect these factors to sort themselves out during 2025 and that transaction volumes will catch up with buyer interest.

For now, I have been advising startups to:

Go in with price expectations that reflect today’s market. The froth of 2021 is long gone.

Expect a long process. Inorganic is designed to start bringing in interest within a few weeks, but the time to negotiate and close could take months.

Be prepared to offer terms that help a buyer de-risk. If a buyer gets nervous, their path of least resistance is to bow out. Get ahead of it. Do they think the team is a flight risk? Offer an earn-out. Are they concerned about integration going smoothly? Add an integration milestone.

Startups that follow these steps should get interest and find a home, albeit with some sub-optimal terms and a longer road to closing.

Bio: Paolo DiVincenzo

Paolo DiVincenzo is the Founder of Inorganic, a platform that connects software startups with strategic acquirers. With extensive experience in the tech and M&A sectors, Paolo focuses on helping startups navigate the complexities of acquisitions, providing strategic guidance on valuation, negotiation, and growth. He is dedicated to facilitating successful exits by aligning startup goals with the right acquirers and market opportunities.

Mario Peshev – Devrix

Mario Peshev highlights that after a turbulent period, the M&A market is stabilizing, driven by improved investor confidence, interest rate cuts, and fewer macroeconomic surprises. He expects continued growth in 2025, particularly in SaaS, e-commerce, and publishing sectors, as businesses embrace AI-driven shifts or seek strategic partnerships to adapt quickly.

Mario’s perspective

“Despite a more turbulent year with a contracting B2B space globally, we see positive moves in the right direction for M&A deals going up in Q2, Q3, and even Q4 of 2024.

This is primarily driven by several factors:

– The massive market crunch started as early as Q3 of 2022, and most companies were already affected, undergoing changes, or transitioning by mid-2023. This year has been an alignment/calibration year for many.

– Pushback last year were caused by macro conditions and the global political environment. While stability is still up in the air, there are fewer day-to-day surprises and breaking news.

– The Fed finally dropped the interest rates by 50 basis points and is expected to make another cut soon.

– The stock market is stable and going up. Investor confidence is high.

Bottom line, buyers and investors are in a better spot in the second half of 2024 and we expect a continued rise in 2025. The general business direction, adjusted for AI adoption and investor demands, also signals drastic shifts in SaaS, e-commerce, directories, publishing sites, Amazon stores, and other segments relying on a bigger push or a strong pivot. And founders who are unwilling or unable to move fast seek strategic partners to build on top of their core foundation or merge within a portfolio of relevant businesses.

Bio: Mario Peshev

Mario has completed 52 deals on Flippa. Mario Peshev is a serial entrepreneur, angel investor, and B2B growth strategist with 25 years of experience scaling digital platforms and launching AI-driven initiatives. He advises executives on GTM strategies through Growth Shuttle and leads full-scale execution for SMEs and Fortune 1,000s via DevriX.

Conclusion

The tech M&A outlook for 2025 is defined by opportunity but tempered by caution. Buyers are more selective, emphasizing profitability, sustainability, and stability over rapid growth. AI remains a major influence, offering growth but also prompting hesitation. Sellers who are prepared, have a clear strategy, and focus on fundamentals will find opportunities in the evolving market. With a favorable financing environment and a more cautious yet optimistic buyer landscape, 2025 is set to be a strong year for quality tech and digital business transactions.

Acknowledgments The report draws on insights from industry leaders including Codie Sanchez (Contrarian Thinking), Tim Schumacher (SaaS Group), Mike Finger (Exit Oasis), Ali Aydar (Sporcle.com), and Paolo DiVincenzo (Inorganic), who have all generously contributed their perspectives on the current and future state of tech M&A.

Making It Easy to Sell Online Businesses
Flippa provides owners and investors with the tools and expertise to sell.