Software M&A has proven resilient in the face of a resurgent pandemic, potential taper tantrum, market volatility, rising inflation and continued disruption to global supply chains. Q3 activity once again reached new record highs driven by broad-based buyer participation, ample liquidity and continued strong growth in software spending.
Publicly traded companies, including non-tech, are on pace to announce the highest number of software deals in over a decade, as they rely on M&A to drive digital transformation. Despite increasing investor redemptions and regulatory scrutiny, the number of tech companies acquired by special purpose acquisition companies in Q3 doubled from Q3 2020. PE acquirers kept up the pressure on strategics by printing some of the largest software deals in the quarter and increasingly dominated the mid-market software M&A scene.
Valuations are rising to never-before-seen levels. Average revenue multiples exceed 2020 figures by over 50%, while PE acquirers are on track to have paid a premium to strategics for the first year on record. Software as a Service valuations continued to trade at a premium, with top-quartile deals on average commanding double digit revenue multiples. With rising prices, target KPI hurdles are also shifting, extending the bifurcation between top and median performers.
We continue to observe a record pace of deal-making, especially in the U.S., where capacity constraint is a key process consideration when coming to market. Based on our activity and investor interactions, we anticipate a very active end to the year and an already strong pipeline coming into 2022.
