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Software and technology M&A update: H1 2024
H1 2024 software and technology public market update
Software and technology public market overview
Software and technology companies have faced significant challenges during the first half of 2024 as the sector faces a complex set of market dynamics. The software and technology sector, often seen as a bellwether for innovation and economic progress, has encountered headwinds that have tempered the sector's momentum. Elevated interest rates, inflationary pressures, market uncertainty and geopolitical concerns have dampened business investment in new technologies. Enterprises within the software and technology sector have adopted a more cautious approach to spending by delaying non-essential tech upgrades.
The challenges facing the software and technology industry in the first half of 2024 have underscored the need for companies to adapt and innovate in response to changing market conditions. Amid the several headwinds, there still rests plenty of growth opportunity for companies within the sector. While broader adoption has slowed, SaaS, AI and automation remain key areas where companies are willing to invest. Enterprises leveraging these technologies to offer enhanced analytics, predictive capabilities and automation are achieving operational efficiencies and cost savings, making them attractive investments amid a period of continued investor caution. As organizations across industries prioritize digital transformation to gain competitive advantages, the demand for intelligent, automated solutions that streamline processes and drive data-driven decision making is expected to rise. This trend is not only limited to large enterprises but also extends to small and medium-sized businesses that are increasingly recognizing the value of technology in scaling operations and improving customer experiences.
In H1 2024, the BT Capital SaaS Index underperformed the broader market (S&P500), as the elevated valuations that once characterized the sector have come under scrutiny and price-to-earnings ratios have compressed. Additionally, as market uncertainty and inflationary pressures continue to squeeze the market and its participants, investors are beginning to rotate out of high-growth tech stocks and into more stable sectors. As the software and technology sector navigates the handful of challenges presented within the first six months of 2024, the ability of its companies to adapt and innovate will be crucial in regaining investor confidence and achieving sustainable growth in the latter half of the year.
H1 2024 SaaS spotlight
Year-to-date BT Capital SaaS index performance and EV / Revenue multiples
As businesses continue their digital transformation journeys, there has been a growing need for integrated solutions that can provide real-time data, analytics and automation. ERP systems, which serve as the backbone for digital enterprise are critical in this regard which is contributing to the segments stocks’ outperformance. ERP and supply chain software is an essential tool for achieving these goals, allowing streamlined processes, reduced waste and improved resource allocation. The disruptions caused by global supply chain challenges, including those stemming from the COVID-19 pandemic and ongoing geopolitical tensions, have highlighted the need for more resilient and agile supply chains positioning the segment for continued growth.
H1 2024 software M&A insights
The first half of 2024 has been the slowest deal count period for mergers and acquisitions since H1 2020 within the software and technology sector. Despite broader economic uncertainties and a challenging macroeconomic environment, software M&A activity continues to be driven by strategic needs, competitive pressures and the pursuit of innovation. Companies in the software and technology industry are leveraging M&A as a critical tool to enhance their capabilities, expand market reach and achieve synergies that are increasingly essential in a rapidly evolving digital landscape. Strategic add-ons, innovation-driven acquisitions and market expansion are driving a significant portion of transactions, as companies seek to strengthen their positions and capitalize on growth opportunities.
As a percentage of overall global deal count, U.S. software M&A transactions increased to 30.8%, up 3.6% through the first half of 2024. Private equity continues to play a critical role within the US M&A landscape. With near record levels of dry powder ready to be deployed, PE firms remain focused on sourcing attractive software assets with strong margins and high levels of recurring revenue. Conversely, foreign companies are actively exploring and executing cross-border software transactions. These foreign buyers are drawn by the market’s size, innovation ecosystem and growth potential. Whether the focus is to diversify geographic exposure, increase U.S. market share or acquire and integrate cutting-edge technology into existing operations (among other strategic initiatives), foreign acquirers will remain active the U.S. M&A market.
H1 2024 SaaS M&A spotlight
A high volume of notable deals were completed in the first half of 2024, including the take private acquisition of Everbridge facilitated by Thoma Bravo. Additionally, a number of high-profile transactions have taken place in the SaaS sector during the first half of 2024, highlighting the strategic importance of M&A in the space. Notably, the $33.5 billion transaction of Ansys by Synopsys represents the largest acquisition in the SaaS sector since Broadcom acquired software maker VMware last November in a $69 billion deal.
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Mergers and acquisitions reports
See reports for different industries and regions
Baker Tilly Capital professionals develop mergers and acquisitions (M&A) updates in different industries and regions. These reports provide an overview of M&A activity, including:
- M&A activity by market segment
- Transaction data for middle market M&A activity
- Buyers and targets by location
- Notable transactions closed during the period of the report
