The first half of 2021 was a strong period for the technology business sector. With the increased distribution of COVID-19 vaccines and governments lifting pandemic-related restrictions, the business environment and the world more generally is resuming to a new normal. Consumers are more keen than ever before to invest in the technology solutions that kept them connected during the lockdowns of the past year. Demand for SaaS, e-commerce and content businesses remains strong. During the first half of 2021, FE International saw an increase in total sale value and volume across the verticals we operate in.
This upward trend in demand for not only improvement of existing technology businesses but also demand for new innovative products has caused the landscape of SaaS business acquisitions to change over the past 6 – 12 months.
If you are an online business owner, or just curious about the latest in the SaaS, e-commerce and content M&A space, we have documented the key trends in our mid-year report, as well as what we expect going into the second half of 2021. We’ve summarized some of the highlights below:
Capital Gains Tax Change on the Horizon
The impending changes to the capital gains tax rate in the US present an optimal time for business exits. The proposed increase to the top rate (39.6%, plus the additional 3.8% surtax on investment income) would raise federal tax rates for wealthy investors to as high as 43.4%. Business owners should be aware of these upcoming changes and make plans accordingly if they are considering divesting of their businesses in the near future.
Productivity SaaS Businesses and Marketplace Apps Continue to Grow
In the first half of 2021, usage of productivity SaaS businesses and marketplace apps continued to soar, following a year of increased reliance on these technologies. We expect this trend to continue as consumers have grown accustomed to using these tools.
E-commerce Continues to Remain Strong
After a shaky start for retailers, the pandemic dramatically increased demand for online stores. Across all products, e-commerce sales increased 32.4% year-over-year in 2020, and were up 39% in the first quarter of 2021, according to a Digital Commerce 360 report. Similarly, Amazon’s own sales increased 44% in Q1 2021, compared to Q1 2020.
Shopify Cuts Commissions on $1M in Revenue
Shopify announced at its annual conference in June that it plans to further incentivize app developers to start new apps and/or reinvest into existing apps by cutting the commissions on the first $1M in app store revenues from 20% to 0% and 15% thereafter. This announcement means many Shopify apps have now increased in value, positioning owners for an optimal exit.
Increase in Volume and Value
In the first half of 2021, the total value of closed deals increased by 25.5% over the second half of 2020. SaaS and content businesses each accounted for more than a third of capital invested and ecommerce businesses accounted for more than a quarter.
We are expecting a bright future for SaaS, e-commerce and content acquisitions. To find out more about how the micro- and mid-cap SaaS, e-commerce and content business acquisition landscape has changed in the past 6-12 months in depth, download our full report.