The software M&A market is now almost equally split between non-tech buyers, financial sponsors, and traditional tech investors. Tech acquisitions have become an essential play for all companies in the post-COVID economy.
In March 2021, the Boston Consulting Group reported that non-technology companies and private equity and venture capital firms represented 31% of deal value shares each in 2020, both up from 18% in 2010, pushing technology companies’ shares down from 64% to 38%.
The lasting impacts of the COVID-19 pandemic on global business mean the ‘next normal’ necessarily involves rapid software-enabled digital transformation. This is reflected in the BCG’s analysis of the software M&A market: In 2020 when all other M&A markets slowed, one leapt ahead. And, the conditions are right for continued growth.
“Now is the time for companies to consider M&A as a way to gain access to new software capabilities and assets. The timing is also good for companies to divest businesses that are no longer part of their core strategy for digital and that may create more value under new ownership.” - Boston Consulting Group
As tech deals grow in size, volume, and strategic importance, software due diligence is becoming an essential part of the acquisition process.
Some of our most sophisticated clients, from corporate M&A to investment funds, start with a software due diligence even before engaging the more traditional legal and financial parts of the process. Speed is often essential, and these clients understand that the main risk is whether the technology will evolve and scale fast enough. - Rodney Reis, Avalia CEO
Software Due Diligence should evaluate:
The software’s impact on the business;
The evolution path of product development processes;
The talent required to deliver the plans.
The benefit of software due diligence is gaining clarity quickly. Identifying the risks and opportunities of an investment and providing actionable insights, software due diligence is becoming increasingly strategic for decision-makers planning for growth and value creation through tech acquisitions.
As more and more companies enter the software M&A market to acquire new capabilities, drive innovation, and gain a competitive edge, the competition for tech talent is also increasing.
Read next: How software due diligence can provide clarity about the people required to accelerate digital transformation, adopt emerging technologies, and update legacy systems to meet business needs.
For data-driven and business-centric Software Due Diligence that delivers results quickly, contact Avalia Systems.