Private Equity Buyouts in the SaaS Sector: The Case of Hg and OneStream

The SaaS sector has long been a magnet for private equity (PE) firms, drawn by its recurring revenue models and scalable growth potential. Now, Hg Capital, a London-based PE firm, appears poised to acquire OneStream, a financial software SaaS provider, in a transaction that underscores broader industry trends. This analysis evaluates the strategic and financial logic behind taking undervalued SaaS firms private, using Hg's potential buyout of OneStream as a case study.

Strategic Rationale: Why OneStream?

Hg's interest in OneStream is rooted in the company's position within a competitive but fragmented market. OneStream competes with industry giants like Oracle and SAP but has carved out a niche in financial planning and analytics, a space where demand for AI-driven solutions is surging. The company's 2024 innovations, including GenAI tools for real-time forecasting, align with the sector's shift toward vertical specialization and AI integration.

For Hg, the acquisition represents an opportunity to leverage OneStream's recurring revenue model, which generated $118.6 million in subscription revenue in Q4 2024-a 35% year-over-year increase. Such predictability is a hallmark of SaaS businesses and a key driver of PE interest. Additionally, OneStream's recent struggles-its stock has fallen 45% from its November 2024 peak-suggest a potential undervaluation. At a current market cap of $4.6 billion, the firm trades at a discount to its 2021 $6 billion valuation, even as it maintains strong financial fundamentals.

Financial Health and Valuation Metrics

OneStream's Q4 2024 results highlight its resilience. Despite a GAAP operating loss of $47.4 million, the company was free cash flow positive and reported non-GAAP operating income of $8.7 million, with a 7% margin. These metrics, combined with its $583 million to $587 million revenue guidance for FY 2025, suggest a path to profitability.

Valuation multiples further support the case for a buyout. In 2024, the median EBITDA multiple for private SaaS firms was 19.2x, reflecting a premium for recurring revenue streams. While OneStream's current market cap implies a lower multiple than its 2021 valuation, its growth trajectory and AI-driven differentiation could justify a higher private valuation under Hg's ownership.

Hg's SaaS Strategy: Long-Term Value Creation

Hg's approach to SaaS acquisitions emphasizes long-term value creation through operational efficiency and strategic consolidation. The firm's 18-year hold on Visma, a European software company, exemplifies this model. During that period, Hg executed over 20 acquisitions and partnered with 30+ PE firms, building a diversified portfolio through a "buy-and-build" strategy.

This playbook is well-suited to the SaaS sector, where consolidation and vertical specialization are key growth drivers. Hg's experience in mission-critical software markets also aligns with OneStream's focus on financial planning-a domain where customer retention and platform stickiness are critical. By deploying capital to accelerate innovation and expand OneStream's global footprint, Hg could enhance its EBITDA margins and justify a premium valuation in future exits.

Industry Trends: PE Dominance in SaaS M&A

The broader SaaS landscape in 2025 is marked by PE firms capturing two-thirds of M&A activity, with Q3 2025 deal value reaching $43 billion. This surge is fueled by favorable financing conditions and PE firms' ability to deploy capital efficiently. However, macroeconomic headwinds-including elevated interest rates and tariff uncertainties- have led to longer holding periods, as firms wait for improved valuation environments.

OneStream's potential buyout fits this trend. By taking the company private, Hg could insulate it from public market volatility while focusing on long-term growth. The transaction also reflects a shift toward mid-market opportunities in fragmented B2B verticals, where PE firms can drive operational improvements more effectively than in highly competitive, commoditized markets.

Risks and Considerations

While the case for a Hg-led buyout is compelling, risks remain. Elevated interest rates increase borrowing costs, potentially compressing returns. Additionally, integrating OneStream's AI innovations into a broader portfolio will require execution discipline. The company's recent secondary offering-a non-dilutive "synthetic secondary"-suggests management has prioritized capital efficiency, but post-acquisition governance will be critical to maintaining this focus.

Conclusion

Hg's potential acquisition of OneStream encapsulates the strategic and financial logic underpinning SaaS buyouts. By leveraging OneStream's recurring revenue model, AI-driven differentiation, and undervalued equity, Hg can pursue a long-term value creation strategy aligned with industry trends. As PE firms continue to dominate SaaS M&A, the success of this transaction will hinge on Hg's ability to execute operational improvements and navigate macroeconomic challenges-a test of both the firm's expertise and the sector's enduring appeal.