.png)
Understanding How a Market Correction Affects Private Valuations — Why Now May Be a Smart Time to Act
- Nov 4, 2025
- 4 min read
Leading bank CEOs, including those at Goldman Sachs, J.P. Morgan, and Morgan Stanley, have recently warned that equities could face a 10 to 20 per cent pullback over the next year or two.¹ This shift in sentiment in public markets is not new. Whenever it occurs, founders of software companies naturally ask:
“If the Nasdaq falls, will the value of my SaaS company fall too?”
The short answer is: not immediately, but eventually and unevenly.
The Private-Market Lag
Public-market valuations change overnight. In contrast, private valuations tend to lag by several quarters. Buyers re-price risk, and lenders adjust their credit appetite during this time. As uncertainty replaces exuberance, disciplined founders can secure strong exits while others wait for a rebound that may take years to materialise.
When the Nasdaq Composite fell roughly 33 per cent in 2022, large-cap SaaS multiples on major cloud indices compressed sharply, often by a third or more.² However, valuations for smaller, profitable software firms in Ireland and the UK softened only modestly. This is because sub-€10 million ARR businesses are valued less on market trends and more on fundamentals: retention, cash flow, and contract quality.³
Why Small SaaS Holds Its Ground
| Factor | Large-cap SaaS | Sub-€10 m ARR SaaS |
|-------------------------------------|----------------------------------------|----------------------------------|
| Valuation driver | Growth narrative, TAM story | Recurring revenue and defensibility |
| Investor type | Public-market growth funds | Private-equity and strategic acquirers |
| Reaction to downturn | Immediate mark-to-market repricing | Gradual adjustment; fundamentals dominate |
| Illustrative effect of a 20% Nasdaq drop | Multiples down ≈ 25–35% | Multiples down ≈ 5–15%* |
Illustrative only; outcomes vary by growth, retention, and profitability
For founders, this means a correction doesn’t erase value, but it does change what buyers reward. Profitability, retention, and pricing discipline will be worth more than growth at any cost.
What Buyers Are Thinking
Private-equity dry powder remains elevated, even after a slight pullback from its 2021–22 peak.⁴ Funds still face pressure to deploy, and many are explicitly targeting resilient, cash-generating SaaS assets.
Financing conditions have also improved from 2023’s trough. Lenders are once again backing mid-market software transactions on a selective basis.⁵ Rising rates have filtered out speculative capital, leaving long-term operators—like Ishikawa Technologies—who can close deals quickly and protect a founder’s legacy.
We focus on quality of earnings, customer durability, and operational clarity. When markets tighten, those qualities become scarce and, therefore, valuable.
The Timing Window
Historically, the best exits occur before the private-market correction fully plays out. Once public multiples have fallen for several quarters, lenders tend to tighten credit. Dealmakers enter lengthy “price-discovery” phases that slow everything down.
Founders who act within the next six to twelve months can still transact on today’s multiples while sharing in future upside through earn-outs or retained equity. Those who wait for the rebound often find that valuations recover far more slowly than headlines suggest.⁶
“Timing isn’t about luck; it’s about reading the cycle and considering your own plans.” — Stuart McCaul, Founder, Ishikawa Technologies
How to Protect and Maximise Your Valuation
Even if you are not planning to sell immediately, now is the time to prepare your house:
Measure what buyers measure: recurring revenue, gross and net retention, and contract term.
Tidy your accounting: clear treatment of deferred income, R&D capitalisation, and cost classification.
Clarify IP ownership and employment contracts: buyers scrutinise these early.
Doing this work now keeps optionality on your side. Whether you sell or hold, the same discipline creates value.
The Founder’s Perspective
Most founders in the €3–€10 million ARR bracket are pragmatic. They have built sustainable businesses that have survived many cycles. However, they also know liquidity windows don’t stay open forever.
The choice is rarely between “selling out” and “holding on.” It is between selling into stability or waiting into uncertainty. The first lets you exit with pride and continuity. The second can mean years of stalled growth and investor fatigue.
Ishikawa’s View
At Ishikawa Technologies, we acquire and grow mature vertical-market SaaS companies across Ireland and the UK. Our focus has always been on operational excellence, not speculation.
A correction plays to our strengths:
Disciplined capital
Embedded post-acquisition operators
Long-term stewardship of founder legacies
“When capital gets cautious, quality execution becomes the most valuable currency.”
We believe the next phase of the market will reward founders who choose clarity over complacency—and who partner with buyers capable of preserving what they built.
Closing Thought
Market cycles are inevitable. Panic is optional. For founders of resilient, recurring-revenue businesses, the coming year may prove to be the best moment to sell from strength before private valuations reset.
If you’d like a confidential, evidence-based view of what your company might be worth in today’s market, we’re always happy to talk. Email: sourcing@ishikawatech.com.
Sources
Fortune / Yahoo Finance / BoE Financial Stability Report – 2025 market-risk commentary.
Nasdaq Composite and BVP Cloud Index performance, 2021–22.
SaaS Capital and PitchBook Private SaaS Valuation Benchmarks (2023–25).
Bain & Co and McKinsey Private-Markets Outlook 2025.
Deloitte Mid-Market Debt Monitor 2025.
EY and Houlihan Lokey mid-market M&A reports 2024–25.
