SaaS acquisition out of administration — full teardown
£1.1m ARR bought for £420k. 14 engineers TUPE'd. £340k AWS arrears cleared on completion day. Churn hit 6.8% then recovered to 2.4% by month four. The exact playbook.
Deal architecture
Administrators (mid-tier IP firm) appointed under Sch B1 para 22 following a £340k AWS demand and £180k VAT arrears from HMRC. Marketed sale ran 9 days, 4 offers, 2-round competitive process.
Buyer's winning bid: £420k all-cash, 5 business-day close, £340k of proceeds ring-fenced for AWS arrears clearance to keep the platform running through the transition.
Assets acquired: source code repositories, 3 registered trademarks (2 UK, 1 EU), 4 domain names (2× .com, 1× .co.uk, 1× .io), 92 customer contracts (subject to change-of-control review), and all in-scope AWS resources.
Cost breakdown
| Line item | £ | Note |
|---|---|---|
| Consideration to administrator | £420,000 | Of which £340k paid to AWS |
| Legal (DD + SPA + IP assignments) | £14,000 | Includes IPO TM16 × 3 |
| Technical code audit | £8,000 | External devsec review |
| Above-cap TUPE arrears | £62,000 | 2 senior engineers above RPS cap |
| Pension arrears | £18,000 | Not RPS-recoverable |
| Retention bonuses (engineers) | £24,000 | Locked in month 4 |
| Landed cost | £546,000 | Excludes churn recovery cost |
What Chris says
"SaaS out of administration is the highest-return category in UK distressed M&A — but only if you can wire funds inside 5 days and keep the platform live through cutover. Every buyer who lost this deal did so on speed, not on price."— Chris, AI deal adviser at Sell Ltd
Related
Frequently asked questions
How was a SaaS with £1.1m ARR only worth £420k?
The ARR was £1.1m but net-new churn was running at 4.2% monthly and the balance sheet showed £340k of accrued unpaid AWS bills. Under Sch B1 IA 1986, administrators must price against realisable value — an ARR-focused solvent valuation of 3–5× MRR doesn't apply when the platform is 4 weeks from being turned off.
How does IP transfer work in an administration sale?
Code, trademarks, patents and copyright are separately assignable assets. The SPA lists each IP asset with schedules. For source code: repository transfer + written assignment. Trademarks: IPO Form TM16 (£50 per class). Domains: Nominet transfer for .uk; registrar transfer for .com. Patents: IPO Form 21 with £30 fee. Total IP legal cost on this deal: £14k.
What happened to the customer contracts?
SaaS T&Cs typically contain change-of-control and administration clauses. 68 of 92 customer contracts contained an automatic termination right on administration. Legal reality: only 3 customers exercised — most preferred continuity. Sell Ltd's playbook is customer outreach inside 48 hours with a 3-month price freeze commitment.
Did engineers TUPE across?
Yes. 14 engineers transferred under reg 4. RPS covered £198k of arrears / notice / redundancy up to the £719/wk cap. Buyer inherited £62k of above-cap salary differential (2 senior engineers on £145k base) and £18k of pension arrears. All 14 stayed for at least 6 months post-transfer with £24k of retention bonuses agreed pre-completion.
Was there any earn-out?
No. Administrators (Sch B1 para 3 IA 1986 fiduciary duty to creditors) rarely accept earn-outs because deferred consideration can't be distributed. £420k was 100% cash on completion. The buyer preserved cash by using ABL against future MRR — see the financing guide.
How did the platform not get turned off?
Emergency AWS bill payment on day 1. Buyer wired £340k on completion (part of the £420k), which cleared the arrears and kept the platform live. Without this, AWS would have terminated within 7 days per its standard TOS. Sell Ltd advises always ring-fencing infrastructure arrears in the funds flow.
What churn recovery looked like
Month 1 churn: 6.8% (spike from administration announcement). Month 2: 4.1%. Month 3: 3.2%. Month 4: 2.4% — new-normal for the sector. Recovery was driven by 3-month price freeze, direct outreach from the new CEO, and a public roadmap commitment. ARR bottomed at £820k, recovered to £1.05m by month 12.
What did DD focus on?
Three areas: (1) code IP ownership (checked every contributor's employment contract for IP assignment clauses), (2) customer contract termination rights, (3) AWS/hosting arrears. Not focused on: revenue quality (assumed 50% churn worst case). Total DD spend: £28k across legal, technical (code audit) and financial.
What was the P&L 12 months post-completion?
£1.05m revenue, £220k EBITDA. Path to profit: (a) renegotiated AWS to reserved instances (saved £84k/yr), (b) removed 2 above-market senior engineers via post-transfer ETO, (c) shifted pricing model to annual up-front. 22% EBITDA margin achieved by month 10.
What was the multiple?
£420k on £1.1m ARR = 0.38× ARR at completion. Post-recovery: £420k on £1.05m ARR = 0.4× ARR. Compare to solvent SaaS multiples of 3–5× ARR — the buyer captured ~10× arbitrage between distressed and solvent pricing, though at meaningful execution risk.
Would a US buyer have done this deal?
Yes and no. UK-based SaaS distress deals attract 30–40% US private-equity attention but most fail on speed — US buyers rarely close in the 5–10 day window UK administrators demand. The £420k price would have been higher (£550k–£650k) if 3+ US bidders had cleared verification in time.
How would Chris source another deal like this?
Sell Ltd's marketplace runs 8–12 UK SaaS administration deals per quarter in the £100k–£2m band. Filter alerts on: SaaS sector, £300k–£1m consideration, TUPE headcount 5–30, AWS/cloud dependency flag. Register as a verified buyer to unlock alerts.