what are their criteria to acquire company?

Progress Software is highly transparent about its "Total Growth Strategy" (TGS) criteria. They aren't looking for the next "unicorn" or a hyper-growth startup; instead, they act as a value-oriented consolidator.

Management specifically looks for "Infrastructure Software" companies that have fallen out of favor with venture capital but remain essential to their customers.

The PRGS "Total Growth" Filter

For a company to be a viable target, it must pass through four distinct filters:

• 1. Financial Profile (The "Sticky Cash" Test): * High Recurring Revenue: They prioritize companies where 80% or more of total revenue is recurring (Maintenance or SaaS).

• High Retention: They look for Net Retention Rates (NRR) near 100%. This proves the software is "mission-critical"—customers can't easily turn it off.

• Low Organic Growth: They are comfortable with growth in the low single digits (0–5%). Because they aren't paying for growth, they can acquire these companies at lower multiples.

• 2. Strategic Alignment (The "Plumbing" Test): * Infrastructure-Centric: They avoid "application" software (like HR or Accounting tools) and focus on the "plumbing" (DevOps, Data Connectivity, Secure File Transfer, and Application Development).

• Mature Market Position: They want products that are either #1 or #2 in their specific niche market.

• 3. Operational Synergy (The "Margin" Test): * Consolidation Potential: PRGS asks: "Can we fold this company’s back-office, sales, and R&D into our own platform?"

• The 40% Rule: They only buy companies where they have a clear path to extracting a ~40% operating margin within 12–18 months of closing.

• 4. Valuation Discipline (The "Price" Test): * The Multiple: Historically, they refuse to overpay. They target an EV/ARR multiple of 3x to 4x.

• Cash Flow Accretion: The acquisition must be immediately accretive to non-GAAP earnings per share (EPS) and free cash flow.

To help you visualize how these criteria interact, you can use the interactive screener below. Adjust the metrics of a hypothetical "Target Company" to see if it would meet the PRGS acquisition playbook.

Did this visual help you understand the answer better?What went wrong? Your feedback helps make Gemini better for everyone. Even when Activity is off, feedback submitted will also include up to the last 24 hours of your conversation to help improve Gemini. Learn more

Since PRGS focuses so heavily on that 40% operating margin, would you like to see a breakdown of exactly which departments (Sales, R&D, G&A) they typically cut to reach that target after a deal closes?