By Maria Castellanos, Managing Partner · April 2026 · 12 min read
Twelve weeks before a Series-B SaaS company was scheduled to receive a strategic acquisition offer, the CEO sat down with us in a Toronto conference room and asked a question he had been carrying for months. "How do I make sure they pay what the business is actually worth?"
It is a question we have heard, in some form, in every senior engagement of the last three years. The answer is structural, and it is more useful than the management team usually wants to hear. Sophisticated buyers — strategic acquirers, growth-stage investors, late-stage capital allocators — underwrite three things. They are not the same three things most management teams optimize. And the gap between what management measures and what buyers pay for is where most valuation arguments fall apart.
The three things are durable revenue, defensible margin, and institutional rigor. Each is a category, not a metric. Each is independently improvable in an 18–24 month window. And the order in which they get moved matters more than most management teams realize.
What follows is the framework we use across engagements, with notes on what works in practice and the failure modes we have watched more than once.
The first driver — durable revenue
Most management teams measure revenue and growth. Buyers measure durability. Durability is not the same as size. A €40M revenue business with 92% net retention, six-figure ACVs across forty enterprise customers, and a clear renewal pattern is more valuable to a sophisticated buyer than a €60M business with 78% net retention and a churn curve that points the wrong way.
Four sub-drivers move durability. Recurring revenue mix — moving from a 60/40 recurring/project mix to 80/20 is one of the most reliable levers we see, and one of the hardest. Net retention — above 110%, a SaaS business is compounding inside its installed base; below 95%, it is leaking. Customer concentration — a business with 40% of revenue from its top five customers carries a discount buyers apply aggressively. Price realization — most mid-market operators have unexploited pricing power the model rarely captures.
Durable revenue is the first driver to move, because it is the most legible to a buyer and the most directly correlated to multiple.
The second driver — defensible margin
Margin matters less than most management teams assume and more than most operators believe. Buyers do not pay a premium for high margin. They pay a premium for margin they can believe will still be there in three years. Defensibility comes from operating leverage with a credible path, structural cost advantage, and technology-enabled cost reduction — across our engagements, AI integration into back-office operations was the most reliable margin lever in 2024 and 2025, producing 200–400 basis points of improvement within twelve months for clients who took it seriously.
Cost-cutting that hits headcount without altering the underlying operating model produces a one-time margin step that buyers discount immediately — they know it reverts within eighteen months. The work that survives is structural, and it is harder, slower, and more valuable.
The third driver — institutional rigor
The third driver is the one most management teams ignore until they cannot. It is also the one most likely to determine whether a sophisticated buyer moves from interest to offer. Institutional rigor is the documentation, controls, governance structure, and operating discipline that let a buyer do diligence without finding holes.
The failure mode we see most often is the diligence sprint — the six-week panic during which a team tries to build twelve months of documentation discipline from scratch. Sophisticated buyers can spot it from the structure of the data room alone, and discount the business accordingly. The work that succeeds is done eighteen to twenty-four months before diligence begins.
The order matters
The three drivers compound, but they do not move at the same speed. Durable revenue is the first to move and the most legible. Defensible margin is slower — structural work takes 12–18 months to show up convincingly. Institutional rigor is slowest: documentation has to be built, used in board cycles, and demonstrated to be operational before a buyer will credit it.
"Management teams that wait to start institutional rigor until after the other two are working tend to run out of time."
The correct order, in our experience, is to begin all three simultaneously and accept that they reach buyer-visible quality at different times.
What this looks like in practice
A worked example from one of the twelve engagements this framework was drawn from. A €38M revenue mid-market SaaS business, founder-led, profitable but uneven, considering a Series-C-equivalent round or a strategic exit within 18 months. We engaged on Consulting terms for twelve weeks of strategy work, followed by a six-month operational engagement and a parallel four-month documentation program, moving all three drivers in parallel.
By month eighteen the business had moved from 78% to 91% net retention, gained 220 basis points of operating margin from AI integration in finance and customer success, and produced a governance and controls package a sophisticated acquirer reviewed in week one of diligence without finding holes. The business sold at a multiple 2.8× higher than the indicative offers it had received eighteen months earlier.
A short checklist for boards
Where is recurring revenue as a share of total today, and where could it be in 18 months? What is the operating leverage in the model — and is the cost growth credible to a sophisticated outside observer? Is the governance and controls package current, or aspirational? How long does the management team have before the next strategic decision, and what is the work that compounds in that window?
A board with clear answers to those four questions is most of the way to the engagement it needs.