2019 Software M&A - Another Record High?

If you looked at the year-to-date software M&A volume of $64.6bn and compared it to last year’s full year amount of $183bn, you would probably conclude that there has been a dramatic slow down in M&A activity for software companies this year. 

However, as the following chart shows, at this time last year, software M&A activity was standing at $51bn – so this year’s activity is currently up 27% year-over-year.

Given last year’s trend of a number of large deals happening in the third and specifically fourth quarters, can we expect the same type of activity in the back half of this year? The chart below shows the biggest 10 deals of last year and the quarter they happened in.  As you can see, the top 3 deals all happened in the second half of last year and accounted for nearly two-thirds of the $ volume.

This translated into record volumes as you can see from the following quarter by quarter look at software M&A volumes over the last 8 quarters.

With North American companies continuing to be flush with cash, and declining earning growth starting to set in (see chart below), more and more companies are looking at M&A as a way to offset slowing growth and deploy excess capital.

Given all this, we expect the second half to be extremely strong for software mergers and acquisitions and potentially even exceed what was achieved last year.