Artificial intelligence is reshaping software M&A. Traditionally, buyers evaluating acquisitions asked: Should we buy this company or build it ourselves? Now, there’s a new factor: Can we build this using AI?

With AI accelerating development cycles, buyers are rethinking acquisitions. Instead of purchasing a company for its technology, they may leverage AI to replicate key functionalities faster and at lower cost. This shift is changing how acquirers assess targets, particularly in SaaS, where automation and AI-powered development tools can dramatically reduce time-to-market.

AI’s Effect on Valuations

This new reality is impacting valuations. If buyers believe AI can replace a target’s core product, they may discount its value or reconsider the acquisition altogether. Future risks, such as AI-driven competition or automation replacing key features, are now factoring into pricing models. Conversely, companies that integrate AI into their offerings—creating proprietary models, data-driven advantages, or deep automation—are commanding stronger multiples. Strategic buyers are prioritizing acquisitions with defensibility beyond technology, such as strong customer loyalty, ecosystem integrations, or regulatory moats.

To maximize value, software founders must:

• Highlight AI Moats – Show why AI cannot easily replicate your product (e.g., proprietary data, industry expertise).
• Leverage AI Instead of Resisting It – Demonstrate how AI enhances your product and differentiates it.
• Emphasize Non-Tech Defensibility – Strong customer relationships and integrations create value beyond software alone.

As AI reshapes M&A, the most valuable companies will be those that use AI strategically, not those at risk of being replaced by it. Sellers must adapt to this new reality to achieve the best exit.