Is software back now?
Equities bounced back, what do you guys think?
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Someone needs to lead the way and bite.
There’s a few good assets in market that should trade.
Not sure if that necessarily means software is back. Lots of shit portcos out there and not sure that average sponsor owned software companies are exactly desired by anyone right now.
No. Software remains bifurcrated with some assets being extremely richly valued such as these AI-native start-ups and others being valued as if there is no terminal value in cash flows due to AI fears. Now just multiples for both are higher than they were in March. Don't think the thesis around either bucket has changed meaningfully. There are likely AI winner assets mispriced as AI losers that will return investor stupid amounts of money if they can find it. However,, trouble is that goes both ways, which is why it is currently hard to evaluate software businesses. Lots of money to be lost or made. There are some deals happening though, TB just took Accelerant private and have sold a few portco's including to other sponsors like FP, FP has been pretty active too, etc. There are probably a good amount of software take-private or attempted software take-privates coming, seems to be what a lot of my peers at large-cap buyout shops are working on.
I am in large-cap growth that primarily does miniority investing though, generally firms from what I see are either aggressively just investing in AI-natives or at least very richy valued companies that have some natural tie-in to AI (infrastracture software).
mid-market verticalised SaaS which are not richly valued, in growth markets (i.e. industrial software) that need some work i.e. higher retention, M&A are still prime and largely not impacted by AI fears. AI is in fact an enabler
Growth in large-cap space I can see being a different story
Can you explain why mid market industrial software benefits from AI? Isn’t it hard for any SAAS company to improve retention?
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