Software and technology M&A update: H2 2024

H2 2024 software and technology public market update

Software and technology public market overview

The software and technology (S&T) sector has experienced a modest rebound after a challenging first half of the year, supported by improving investor sentiment, the accelerating adoption of automation, and the positive effects of recent interest rate cuts. As market conditions have stabilized, companies are renewing their focus on digital transformation, leveraging technological advancements to drive efficiency, cost savings, and competitive advantages. Generative AI has emerged as a key catalyst for this growth, reshaping business models and operational frameworks across industries. What was once theoretical is now becoming a strategic imperative, as organizations actively integrate AI-powered automation to enhance decision-making, streamline workflows, and improve scalability. Industries from finance and healthcare to manufacturing and retail are rapidly deploying AI-driven solutions to optimize processes, reduce labor-intensive tasks, and pursue new revenue opportunities. As the momentum behind generative AI continues to build, its impact is expected to further solidify the S&T sector’s role as a driver of innovation and long-term economic growth.

The software and technology industry benefitted from the Federal Reserve’s (FED) interest rate cuts in H2 2024, which improved market conditions for high-growth sectors including S&T. Given the reliance on growth and innovation, the S&T industry remains highly sensitive to interest rate fluctuations, with lower rates supporting investment. As inflation stabilizes near the FED’s 2% target and economic indicators remain steady, the software and technology industry is primed to sustain its momentum with support from government incentives and renewed investor confidence.

In H2 2024, the BT Capital Software as a service (SaaS) Index continued to underperform broader benchmark indexes such as the S&P 500, highlighting a lack of market breadth within the industry. While select software categories experienced strong growth, overall sector performance remained uneven, as a result of shifting enterprise priorities and broader market pressures. Despite the index’s overall underperformance, it was buoyed by a few standout high performers, including Palantir (340.5%), Similar Web Ltd. (165.9%), and ReposiTrack, Inc. (121.1%). These companies benefited from strong demand for AI-driven analytics, data intelligence, and supply chain automation, which remained top priorities for enterprises navigating economic uncertainty. Outside of these high-performing names, much of the SaaS landscape struggled to maintain momentum. The sector faced continued pressure from budget-conscious enterprises, prioritizing mission-critical software over discretionary spending.

H2 2024 SaaS spotlight

Year-to-date BT Capital SaaS index performance and EV / Revenue multiples

Companies within the business and analytics, enterprise resource planning (ERP) and supply chain, and financial application categories realized outsized gains of ~25% to ~30% over the course of the year. Growth of these categories can be equated to heightened demand for companies from all sectors to incorporate data-driven decision making, limit waste and overhead, and prioritize solutions that enhance productivity and financial output. Focused investments into these software categories can be attributed to the lagging gains of others such as security in addition to CRM, sales and marketing.

H2 2024 software M&A insights

In the second half of 2024, merger and acquisition activity within the software and technology sector rebounded to levels similar to those seen in the latter half of 2023, resulting in flat year-over-year growth. The recovery was driven by increased dealmaking among strategic acquirers and private equity firms, as stabilizing interest rates and improved market sentiment encouraged transactions. However, despite this resurgence, overall M&A volume for 2024 remained relatively unchanged from 2023, reflecting continued caution in valuations and selective acquisition strategies. Investors and acquirers prioritized companies with strong recurring revenue models, AI-driven capabilities, and mission-critical solutions, while less differentiated software firms struggled to attract significant buyer interest.

As a percentage of overall global deal count, U.S. software M&A transactions accounted for 30.4% of the total global deal count, marking a slight decline from previous periods. Private equity firms remain a dominant force in the U.S. M&A landscape, pursuing both domestic and international software assets. With a limited pool of high-quality targets and increasing pressure from limited partners to deploy capital and generate returns, PE firms continued to focus on enterprises illustrating strong recurring revenue streams, consistent top-line growth, and attractive margins.

Application software continues to be the primary focus of buyers through H2 2024 representing 89% of all transactions completed and disclosed in H2 2024 with systems software capturing the remaining 11% of transactions in the period. Strategic add-ons represented the most transactions in H2 2024, as companies seek to bolster their existing capabilities, fill gaps in their product portfolios, and enhance their competitive positioning in an increasingly challenging market. 

H2 2024 SaaS M&A spotlight

A significant number of notable deals closed in the second half of 2024, including Permira’s take-private acquisition of Squarespace. The SaaS sector also saw several high-profile transactions, underscoring the strategic role of M&A in the industry. Notably, Siemens’ $10.7 billion acquisition of Altair highlights the growing imperative for companies across all end markets to integrate AI technology.

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