The Process of Buying a SaaS Business

Acquiring a SaaS business can be a confusing and complex process, but with the right knowledge from the start, it can be exciting and efficient. Below we explain in detail the steps to acquiring a SaaS business through FE.

Identifying the Opportunity

If you have reviewed our business listings and found one of interest, contact us directly. Alternatively, we’ll notify you immediately of new listings if you register for our mailing list.

If it’s the first time you have requested further information, you will be asked to complete a non-disclosure agreement (NDA). This protects the seller’s information and allows our advisors to share information with you on all future listings.

In some cases, you may be asked to further qualify your eligibility for information, including documented proof of funds.

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Reviewing the Business

Our M&A advisors will prepare a very detailed prospectus for you to examine the business. The document typically includes information on:

  • Business operations;
  • Growth opportunities;
  • Market trends;
  • Traffic;
  • Financial performance; and
  • Continuing obligations.

The prospectus also usually includes a detailed seller questionnaire covering a number of topics including day-to-day operations, sale rationale, customer base, products/services and marketing etc.

After reviewing the materials, you should ask questions of the M&A advisor and arrange a call to discuss the business with the seller before making an offer.

Making an Offer

After reviewing the prospectus, following up with Q&A and conducting your own background research, you should be ready to make an offer for the business. You formalise this with a letter of intent (LOI) which is a standard-form non-binding agreement between buyer and seller to proceed forward with certain offer terms on a good-faith basis. Note, it is not legally binding but changes to its terms later in the process without reason or mutual consent is frowned upon.

The most important things to factor into a competitive LOI are:

Consideration – Make it explicit what the offer structure is. What is the split between upfront consideration vs. holdback and/or seller financing? What are the conditions attached (if any)?

Owner financing – Financing is typically offered on a case-by-case business. The majority of smaller transactions are all-cash.

Non-compete  Most sellers represented through a broker will typically commit to a non-compete agreement of 2-3 years provided the business is of appropriate scale but ensure you ask for this in any event.

Exclusivity – A period of no marketing may be agreed to by the seller if the terms of the offer are very competitive, the business is very complex or the seller has a high level of confidence in the buyer’s ability to execute.

Speed and certainty– The demand for online businesses is high and continuing to rise as more investors are attracted to the asset class. With a significant amount of new and inexperienced buyers in the market, often the best offer is not the highest but the one with the greatest degree of speed and execution certainty. Buyers that can proceed through due diligence, legal workstreams and into closing the fastest will be more likely to have their offer accepted from the outset. Buyers should seriously consider using speed of execution as a way of making your offer more competitive.

Due Diligence

Once an offer has been accepted, the transaction proceeds into due diligence (DD). Due diligence of an online business is slightly different from a brick-and-mortar company which can often confuse first-time buyers. Naturally, the principle of fact-checking is still the same, but without tangible assets and a very different customer acquisition process, due diligence is usually focused on the following areas:

Traffic – While a brick-and-mortar business will often have customers walking in through the front door, customers for internet businesses visit from a variety online sources. Buyers should focus on checking the traffic sources, the backlink profile and metrics for visits to make sure everything stacks up. Most established brokers will provide access to Google Analytics, or another service is provided to the buyer to carry this out.

Financials – Traditional investors often expect to see audited books or tax returns for the business during the sale process. In reality, the majority of online businesses are owner-managed and having audited statements is quite rare. A good broker will perform extensive pre-listing due diligence on the financials and then provide all the supporting documentation (PayPal statements, invoices, credit card statements etc.) to the buyer during due diligence. As a second step of verification, you should always arrange for a live screen-share with the seller to walk through the back-end of the website and associated payment platform(s). This will authenticate ownership and validate the numbers you have been looking at.

Maintenance – Most online businesses (even relatively large ones) have grown out from “hobby websites” or family businesses, and as such are very often owner-run. Because of this it’s important for investors to analyze the business owner’s daily, weekly, and monthly tasks to be able to properly account with the cost and effort of outsourcing or taking on those work streams. It’s particularly important to evaluate and understand the difficulty of the tasks that the current owner is performing if you are going to keep them in house.

Without physical assets to examine or a large amount of audited statements to review, due diligence for online businesses usually takes 1-10 business days. Of course, this process will differ for e-commerce businesses.


In tandem with the due diligence process, our M&A advisor will prepare the Asset Purchase Agreement (APA) for the transaction. This typically works from a standard-form template and is then tailored to suit the specifics of each transaction. Within the contract, buyer and seller formalize the consideration terms, assets to be transferred, breadth of the non-compete, training and support for the buyer post-sale, as well as other details.

You should always have your legal counsel independently review the contract before signing.

Transfer & Escrow

Once due diligence has been completed and the APA is signed, the transaction proceeds into closing. Most well-established brokers will use an escrow process to facilitate the secure funding of the transaction and transfer of assets. The go-to solution below $500K is usually; most tend to use attorney escrow above this value. Be extremely cautious about transferring funds outside of an escrow service.

Note: an escrow agent may also be charged with managing the hold back or financing payments. In this case, it is common for the escrow agent to hold all of the funds upfront, and/or hold the domains of the business until all payments are due.

Naturally, first-time buyers quite often ask what protection is afforded to them during this process. In the very rare case that assets have been misrepresented or not transferred in entirety, the buyer can notify the escrow agent during the inspection period. If there is a legitimate misrepresentation, the transaction will be reversed. However, the escrow inspection period is not a “try before you buy” – once all of the assets listed in the APA are transferred, accounted for and operational, it is expected that the buyer will immediately release funds.

The transfer of assets usually involves (but is not limited to) the handing over of:

  • Domain(s)
  • Website content
  • Graphics, images and logos.
  • Social media accounts.
  • Client database (email lists)
  • Source code repository
  • Database repository
  • Advertising and affiliate accounts (if applicable)
  • Hosting account
  • Physical inventory
  • Customer service account (e.g. HelpScout)
  • Marketing automation account