Vertical SaaS Survives on Operating Leverage, Not Multiples

Kneat just got court approval for its Thoma Bravo acquisition three days ago. The deal closed at roughly half the company’s 2021 peak valuation.

I keep seeing this pattern with vertical SaaS companies that built solid products but missed the operational leverage window. Kneat had real enterprise customers in life sciences and pharma, regulated industries that don’t churn easily. Revenue was there. The problem wasn’t the market or the product.

The problem was that growth assumptions from 2020-2021 required a different cost structure than what actually happened in 2023-2025.

When multiples compressed and the capital markets shifted, the operating model didn’t adjust fast enough. High burn, enterprise sales cycles that lengthened, and CAC that climbed while LTV assumptions stayed static.

Thoma Bravo is buying at a significant discount because they can see the EBITDA path that the public market wouldn’t wait for. They’ll stabilize the cost base, likely consolidate some functions with other portfolio companies in adjacent verticals, and turn this into a cash-generative asset within 18-24 months.

The lesson for portco operators isn’t that SaaS is broken. But operating assumptions that worked in a 15x-20x revenue multiple environment don’t survive in a 4x-6x world.

The companies that made it through were the ones that rebuilt their unit economics and go-to-market motion in 2023, not 2025. Everyone else sold in 2020-2021 or faces a similar multiples dilemma today.

Most PE-backed software companies I work with now treat every dollar of incremental revenue against its fully-loaded acquisition cost and payback period. Especially since financial engineering isn’t the key mechanic to flip portfolio companies anymore.