Software Mergers & Acquisitions See Uptick

Technology M&A firm Deal Capital has noticed a significant increase in the volume, quality and size of technology and software deals in the $10 to $50 million range in the last six months. The company sees such increases as a combination of several factors. First, the overall financial market is seeing improvement thanks to some of the internal restructuring within the financial sector (fueled in part by the assistance from the Federal Reserve). In addition, the software market is seeing rapid growth as companies with models based on cloud computing technology are becoming more favorable as acquisition targets from larger potential acquirers.

"In short, as we're seeing the financial markets reach a more normal equilibrium, the other sectors of the economy are following suit," says Jon Castano, marketing manager for DealCapital.com. Deal Capital also sees the growth in software mergers & acquisitions as a key component for driving M&A in other sectors as well. "As we would assume, more demand for software spills over into other areas like hardware, support and other ancillary BPO solutions," says Castano. "The rising tide is lifting all boats," he says.

Is the bump in software mergers sustainable?

While some have argued the latest increase in M&A activity, particularly in software and technology is fueled mostly by the regular $85 billion per month Fed bond-buying, the underlying economics of the software sector still seem to be robust. Growth in remote server-client controls and off-site managed hosting and security is helping to fuel this sustainable growth.

"Only when the bond-buying stops will we be able to truly see how sustainable the M&A markets are," says Castano. Latent demand is also helping to fuel the fire as the economic collapse from 2008 onward. "We expect that some of the latent demand will be front-loaded, however we also recognize that many proprietary deals may stay on the market even longer as multiples and general economics improve further."

The remaining half of 2013 will be very telling as to the sustainability of the industry, "but we expect things to remain hot and heavy for the coming months," says Castano.

About Deal Capital

Deal Capital is a middle market merger and acquisition specialist with partner offices from New York to San Francisco. The company is focused on working with long-standing entrepreneurs in selling their businesses. They are particularly focused on the software and technologies services market. For more information, please visit http://www.dealcapital.com/software/