Software & Technology M&A Pulse – Q2 2024

M&A Market Dynamics – Software & Technology

Transaction volume and total value both dropped noticeably in Q2 2024 compared to the previous quarter for the software & technology sector. Continued economic and political uncertainty kept many investors on the sidelines as they opportunistically sought deals.

A stricter borrowing environment pressured the amount of debt private equity firms could obtain while also impacting potential returns. Additionally, some of the key publicly-traded acquirers in the space appear to be showing less interest in M&A based on an analysis of earnings call transcripts. Despite these factors, quality deals are still being pursued, particularly from aggressive investors capitalizing on reduced competition from larger strategic buyers.

• After an uptick in Q1 2024 in both total software deal volume and deal value, Q2 2024 saw a decline in both software deal volume and deal value. The slowdown in the software segment correlated with the broader technology sector, as the broader technology sector’s total deal value dropped 37% relative to the prior quarter, with $101B in transaction value.
• The software segment declined 11% in deal volume and 31% in deal value compared to Q1 2024. Compared to Q2 2023, transaction volume was down 22% while total deal value was up 38%, indicating that the fewer deals being completed were larger in size. When looking at the broader technology sector, three of the last four quarters exceeded $100B in total transaction value after not eclipsing that mark in the previous four quarters.
• In addition to a higher interest rate environment slowing down deal activity from private equity investors, some of the largest strategic buyers are showing limited interest in dealmaking. According to an analysis of quarterly earnings call transcripts from US-listed tech providers, the number of mentions of “acquisition” or “M&A” has dropped by roughly one-third compared to pre-pandemic levels. Furthermore, in 2024, NASDAQ and NYSE traded companies are on pace to announce the fewest number of transactions in at least 20 years.

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