The landscape of venture capital exits is undergoing a massive reassessment, particularly concerning merger and acquisition (M&A) activity.
While strategic acquisitions remain a critical exit route, the market has shifted dramatically towards smaller deals characterised by higher buyer caution and increased structural complexity. This trend holds significant implications for startups across Southeast Asia (SEA) aiming for major acquisition events.
The insights from the comprehensive study State of Exits 2025: From Alpha to Omega by RETVRN Research, reveal a stark reality in the M&A world: scale has become elusive for most. Despite modest improvements in IPO activity, particularly with 13 US-based venture-backed companies going public at US$1 billion-plus valuations in 2025 YTD (as of July 2025), compared to just eight for the entire year of 2024, the overall M&A picture remains highly constrained.
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The most telling data point reinforcing the “reality gap” is the distribution of transaction values. The study confirms that 96 per cent of M&A transactions are valued below US$500 million. Furthermore, a significant portion of these deals is concentrated at the lower end of the spectrum, with 70 per cent of all M&A transactions valued under US$100 million.
This statistic paints a clear picture: mega-exits remain rare, and the majority of liquidity events fall into the realm of small to mid-sized strategic acquisitions.
Buyer selectivity and value growth amid volume decline
Global M&A volumes declined by 9 per cent in the first half of 2025. However, counterintuitively, deal values increased by 15 per cent during the same period.
This contradiction is highly revealing; it signifies a market that has become exceptionally selective, consistently favouring only the highest-quality assets. Acquirers are deploying large sums for proven, critical technologies, but are pulling back on speculative or merely average opportunities.
For founders, particularly in SEA, where large regional conglomerates or international players are the typical buyers, this means the bar for being considered a “high-quality asset” has never been higher. The market is no longer forgiving of volatile performance or unproven unit economics.
The pervasiveness of structured deals
Perhaps the most structural change affecting M&A negotiation is the rise of structured deals. The shift reflects profound caution on the part of buyers and a corresponding willingness by sellers to share risk. This is fundamentally altering how M&A transactions are negotiated and valued.
A staggering 73 per cent of deals now include extensive earnout provisions. Moreover, an average of 42 per cent of the total consideration is contingent on future performance metrics. This mechanism ensures that the buyer pays a significant portion of the price only if the acquired company meets predefined milestones after the transaction closes.
The commitment period for sellers has also extended considerably. The average earnout period has stretched to 3.2 years, up significantly from 2.1 years in 2020. This means founders and key staff are now tied to the acquiring entity and its performance metrics for a much longer duration to realise the full transaction value.
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Founders must prepare for this reality by ensuring their internal operational excellence is impeccable, with reliable forecasts that deliver consistent results (within a margin of plus or minus 10-15 per cent accuracy).
Valuation compression and the SaaS reality check
The market correction following the peak years has had a profound impact on sector valuations, particularly in enterprise SaaS. RETVRN Research notes that valuation multiples for Enterprise SaaS have experienced severe compression, declining from peak levels of 15 times revenue to a median multiple that has now stabilised at 7.0 times current run-rate annualised revenue.
While this stabilised multiple is consistent with historical norms, it represents a dramatic correction from the 2021 peaks. Peak multiples were reached in Q4 2021 at 12.8 times revenue for SaaS companies, before hitting a trough in Q3 2023 at 3.2 times revenue—a 75 per cent decline. The subsequent recovery pattern shows gradual stabilisation in the 6-8 times revenue range.
For bootstrapped companies, the median average is even lower, at 4.8 times revenue, while equity-backed companies average 5.3 times revenue. These figures confirm that while the market is recovering, the era of exuberant, growth-at-all-costs valuations is over. The median valuation multiple has stabilised, demanding disciplined financial performance from all founders.
The early exit strategy
The data indicates that planning for an exit must begin much earlier than many founders currently assume. Over 60 per cent of acquisitions happen at or before the Series A stage. Specifically, 47 per cent of acquisitions analysed in 2025 were Seed-stage acquisitions.
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The majority of founders are always closer to an exit than they realise, but a lack of exit planning often exposes them to mediocre exit outcomes. Given the dominance of small-to-mid-sized deals and the prevalence of earnouts, achieving a premium valuation now relies entirely on early strategic alignment, clean operational data rooms, and proactive cultivation of strategic relationships 18–24 months before the intended exit. This focused preparation is the only way to successfully navigate the highly selective, structure-heavy M&A landscape defined by caution and a firm grip on reality.
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