Software industry withstands market turbulence, remains hot for PE firms

Private equity deal activity in the software sector remained strong through the first half of 2022, despite much of the technology space grappling with falling valuations, dropping stock prices and macroeconomic headwinds.

Through Q2 of this year, PE firms have completed 378 deals within the software sector, totaling $74.4 billion, compared to 407 deals totaling $60.6 billion in the same period last year. The second half of 2021 saw a surge in software deals, as the year finished out with $173.1 billion in deals, according to our latest US PE Breakdown.

Unlike many other sectors this year, the software industry has not been hit as hard by rising interest rates, surging inflation and geopolitical tensions, as PE firms look to pounce on falling valuations, according to our report.

PE deals within the information technology software sub-sector have performed notably well, with firms so far completing 256 deals totaling $24.7 billion—accounting for 27.7% of total PE deals across all sectors in the second quarter.
   
Analysts expect that IT deal activity will remain strong this year, thanks to PE’s focus on digitalization and technological innovation.

Thoma Bravo completed one of the quarter’s largest software deals with its $2.6 billion acquisition of Bottomline Technologies, a provider of financial technology. Like investments within the IT space, the fintech software sub-sector has been one of the industry’s most popular investment spaces.

PE firms have targeted fintech companies in greater numbers as ecommerce’s dominance has increased the demand for companies that can provide secure and fast digital transactions, according to our report.

Integrum Holdings landed one of the quarter’s largest fintech deals, with its $290 million acquisition of Merchant eSolutions, a fintech payment platform developer, from Cielo.

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This article originally appeared on PitchBook News