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.
Private equity has lost its appetite for the messy software carveout. Francisco Partners' $1.4 billion acquisition of Moneris shows that PE will still pay for predictability. Rather than signaling a recovery in corporate divestitures, the Moneris deal is a glaring outlier that highlights exactly what sponsors refuse to buy right now.
Startup liquidity is rebounding, but valuations are not. Bending Spoons' $1.3 billion acquisition of Airtable pushes the number of 10-figure venture exits toward an annual high. Many startups, however, are being sold at valuations well below what VCs once expected.
Software buyers aren't buying much these days. But when they are, they're paying up. Overall, valuations continue to tick down. Yet, at the high end of the market, acquisitions are getting more expensive because AI is increasing demand for companies that own proprietary data from niche workflows.
The software exit overhang in private equity is awful and likely to get worse. Sponsors no longer own the software companies that buyers want. In the preceding decade, buyout shops could count on flipping a quarter of their software platforms within four years. These days, about one in 20 find an exit during that time.
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.
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