Software M&A Report:
Recovery Driven by Share-Price Performance and Megatrends

The recovery of the software M&A market is just beginning after a slowdown in 2023

We expect software M&A activity to increase in the coming quarters for several reasons. While 2023 saw a significant acceleration towards an economic soft landing, the consecutive quarters of sharp interest rate increases, had previously caused a decline in M&A activity across sectors. However, recent announcements of scaling back interest rates have boosted investor sentiment once again. Furthermore, the ongoing strength of megatrends such as generative AI provide a highly positive outlook for 2024.

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Financial Services Software: Strong Fundamentals Driving Growth and M&A Momentum

Especially the Financial Services Software market is characterized by solid foundations with a positive outlook for the years ahead. 2024 will offer owners a great opportunity for selling their shares as M&A activity is likely to rebound with valuations rising again. Consolidation in many sectors is already underway.
The financial services industry is generating approximately $12.5 trillion in annual revenue with a highly attractive average profit margin of around 18%. Historically, customer experience in the financial services sector has been notably poor, presenting significant opportunities for modern solutions enabling strong growth. While emerging markets, such as India, are poised to become fintech hubs, driven by young, tech-savvy populations and many unbanked citizens, new technological disruptions, such as generative AI and distributed ledger technology (DLT), are making a significant impact, boosting productivity and enhancing network security. These favorable trends and new regulatory initiatives will support growth, which is particularly reflected in the company valuations of the Financial Services Software sub-sector, which have outperformed the valuations of the general software market. We expect this trend to continue throughout 2024. :