M&A Market Dynamics – Software & Technology
- Despite the broader technology sector showing an uptick in both deal value and deal volume in the second quarter of 2023 compared to the previous quarter, software specifically saw a modest decrease in value while volume remained largely flat, with 629 transactions in the quarter combining for $27.7B in value.
- Compared to Q1 2023, Q2 2023 software deal volume was down 0.6% while total value was down 7.8%. This represents a continued reduction in average deal size, a product of fewer large deals combined with lighter valuations.
- The M&A landscape continues to evolve in 2023, with strategic deals increasing in overall transaction volume share relative to private equity platform and add-on investments. Through the first half of 2023, the number of financial sponsor-to-sponsor deals is on pace for its lowest annual total since 2016. The shift in transaction mix could be attributable to higher credit costs leading private equity firms into decreased deal activity coupled with top tier investors delaying going to market as sponsors wait for higher valuations to boost returns.