I’ve written before that every company has two kinds of customers: those buying its product and those buying its equity.
Regarding customer traction for products, product-market fit has become a core concept, gaining popularity since Marc Andreessen highlighted it in 2007, with around 9 million Google hits today.
Building on this concept, other fits have emerged — such as founder-market fit, go-to-market fit, and company-market fit.
That’s why I feel safe introducing the idea of M&A-market fit, focused on generating traction among equity buyers.
In my field, building M&A traction — by sourcing, connecting with, and marketing to potential buyers — makes up about 75% of the value I provide.
I’ve written before that M&A traction is often linked to the number of addressable Active Buyers — those ready to explore acquisition opportunities.
Financial buyers, who operate in acquisition mode by default, make up the most active segment of these buyers; however, they generally seek targets with €10M ARR or higher — a threshold indicating maturity.
This leaves SaaS companies with ARR between €3–8M typically limited to strategic buyers.
In these SaaS M&A evaluations, I often notice signs of the Dunning-Kruger effect — a cognitive bias where those with limited experience tend to underestimate the complexities involved.
For this reason, I always ask SaaS founders and board members two essential questions:
Who are your ideal buyers? (1)
Do these buyers know you? (2)
Because,
STRATEGICS WANT SIZE (1)
When asked who their ideal buyers are, the response is often the large U.S. players — the industry giants known for their headline-making acquisitions.
However, these large strategic buyers generally require a target company with at least $20M ARR to consider an acquisition seriously; for some, like Salesforce, the threshold is closer to $50M.
Contrary to what many expect, integrating a $5M ARR company demands similar resources as a $50M ARR one, making larger deals a more efficient use of resources.
For companies under $20M ARR, their product or technology must be strategically crucial to the buyer’s objectives.
Given the incentives involved, these SaaS founders and board members often believe this to be the case.
That’s why I always follow up with the second question: “Do these buyers know you?”
As,
STRATEGICS NEED A RELATIONSHIP
When offers do come from these large industry giants, they’re often initiated by a decision-maker who already knows and trusts the founders.
Strategics take their time; they want a deep understanding of the founders, the product, and how it complements their own offerings.
Beyond the CEO’s approval, buy-in is typically required from key personnel across the organization, including the product team, CTO, and engineering.
Bootstrapping a relationship all the way to the level of trust required for a real M&A offer in a six-month window has been a consistent challenge.
I tried many times in nearly a decade, it has never worked.
Let’s assume you are the founders of a €3–8m ARR SaaS without established connections with large strategic buyers over the past two to three years.
The process for seeking qualified strategic buyers — those we could get attention from — is more of an exploration than a precise search.
To guide this exploratory process, we use a framework for evaluating M&A-market fit based on two main criteria: Scale and Scope
In terms of Scale, I’ve learned that buyers should ideally be no more than 20 times larger than your company, meaning qualified buyers for a €3–8m ARR SaaS are often within the €50–150m revenue range.
However, buyers in your primary market tend to focus on consolidation, usually resulting in lower valuations since customers are often viewed as the only valuable assets.
This is why Scope is essential as the best-qualified buyers often exist in adjacent markets — a market space that touches on the primary market.
Every market typically has about seven adjacent markets.
There are two complementary methods to identify these adjacent markets:
Based on your ICP market (Ideal Customer Profile), which is fairly intuitive,
Based on your use-case objections, which is less straightforward.
When using the ICP method, look for companies within the €50–150M range that target similar ICPs and analyze their market positioning. The more ICPs you serve, the more adjacent markets you’ll uncover.
With the use-case approach, the focus shifts to examining why certain leads didn’t convert into clients or why upselling existing clients fell short, rather than only looking at why clients chose your product.
This method has proven effective because certain buyers may have solutions that address the objections currently limiting your growth.
By assessing synergies, you’re not just relying on the buyer’s go-to-market engine but also actively leveraging your own, creating a combined growth strategy.
This approach is highly valuable, especially for growing €50–150M ARR buyers, as they often rely on acquisitions to keep up their growth momentum.
In conclusion, a systematic approach to M&A-market fit, based on Scale and Scope, enables smaller SaaS companies to drive traction among their potential equity customers.
Good luck!
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