Scott Denne has covered the intersection of technology and capital markets for his entire career. In late 2023, Scott began his second tour at 451 Research from S&P Energy Horizons, where he covers acquisitions, valuation trends and private equity investments. His research explores changes in dealmaking and shifts in valuation. His reports cover broad movements in the tech M&A markets, private-equity investments, analysis of specific deals and forecasts of deal activity in multiple sectors of the software industry. Previously, Scott spent two years as Director of Technology Research for BWG Strategy. In that role, Scott provided primary research to buyside equity investors through a mix of surveys and moderated group discussions. The coverage was built around collecting spend intention, sentiment and budget outlook from customers and channel partners across a universe of 50+ enterprise software tickers. Prior to an eight-year stint as an M&A analyst with 451 Research, Scott was a reporter covering startups and venture capital for several Dow Jones publications, including VentureWire, Private Equity Analyst and The Wall Street Journal. He has been quoted by financial and technology publications, including TheStreet.com, Wired, CNBC.com, AdExchanger and CMSwire.
AI is exacerbating venture capital's liquidity problem. To keep pace with the gobs of money that the asset class put to work in the last boom, investors need a step-function increase in the exit market. Instead, they're staring down a so-so year.
AI-driven capital reallocation is breaking the historical link between public equity performance and software acquisitions, removing a major support for software valuations. As investments flow toward hardware, software M&A has become unmoored from the stock market.
Tough questions about the impact of AI have severely curtailed acquirer interest in software companies. Traditional acquirers, namely buyout shops and other software vendors, have limited capacity for new deals. However, one cohort that has been largely priced out could well find its way into the market as software multiples sink to new lows: service providers.
Amid a downturn in software M&A, one group of acquirers is still spending. With (relatively) stable valuations and a mandate to grab as much market share as they can, venture-funded companies are taking a larger share of software dealmaking than ever before.
Three months after a product announcement from Anthropic crushed software stocks, consolidation of software companies shows no signs of recovery. As May begins, software M&A spending has fallen to levels that haven't been seen since the COVID-19 outbreak.
The perception that AI represents an existential threat to enterprise software sent those stocks spiraling downward in February. At the time, many believed the negative sentiment across the category would give way to a sorting of the potential winners and losers of the AI era. Two months later, that hasn't happened.
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