"The threat of AI has sent shockwaves through the software sector, hammering share prices and creating, in the words of analysts at RBC Capital Markets, a rare opportunity for "opportunistic" buyers. Once-high-flying software companies are now trading at deep discounts as investors worry about how generative AI could upend SaaS business models. That same anxiety, the analysts argue, is laying the groundwork for a new wave of dealmaking. According to RBC, software M&A activity has surged 78% this year, with private-equity deal volume more than doubling as sponsors hunt for bargains."
"While noting they have no knowledge of any such deals, the analysts listed potential targets, all of which have solid customer bases and cash flow but limited AI narratives. Private-equity buyers, less constrained by quarterly earnings pressure, could move quickly to take these companies private, reset expectations, and rebuild them for an AI-first world. While regulatory scrutiny remains a hurdle for mega-cap tech acquirers, financial sponsors are freer to strike."
AI disruption has hammered software share prices, creating discounted valuations and investor concerns about generative AI upending SaaS models. Software M&A activity has surged 78% this year, with private-equity deal volume more than doubling as sponsors hunt bargains. Many software companies retain solid customer bases and cash flow but lack compelling AI narratives, making them attractive takeover candidates. Private-equity buyers can move quickly to take companies private, reset expectations, and rebuild them for an AI-first world. Regulatory scrutiny constrains mega-cap acquirers, while financial sponsors face fewer constraints and can accelerate dealmaking as sentiment stabilizes and valuations remain depressed.
Read at Business Insider
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