GCA Software Sector Report Q4 2020

In Q4 2020, M&A deal activity and overall M&A deal value continued its aggressive growth, and private financing activity grew at an accelerating pace. Investors continue to show a strong desire for software business models amidst greater cloud adoption and remote work environments, evidenced by another quarter of favorable performances in public markets.
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The GCA Software Sector Report is tailored to the needs of busy executives and investors seeking a comprehensive overview of the M&A and valuation landscape, trend analyses and insights into the current transaction environment.

Key developments in Q2 were:

 

  • In Q4 2020, M&A deal activity and overall M&A deal value continued its aggressive growth, and private financing activity grew at an accelerating pace. Investors continue to show a strong desire for software business models amidst greater cloud adoption and remote work environments, evidenced by another quarter of favorable performances in public markets
    • Software sector performed well in Q4 with the IGV tech-software index outperforming the S&P 500 by 35.7% LTM as of Q4 2020
    • Infrastructure software index grew 118.7% LTM as of Q4 2020, outperforming all other software sub segments
  • Q4 2020 saw ~$22bn in financing deal value and ~$76bn in M&A deal value
    • 284 financings, 25.1% higher than Q4 ‘19
    • 532 M&A transactions, 52.4% higher than Q4 ’19
  • Significant M&A activity in Q4 includes acquisitions in the ERP & General Business sector: Salesforce’s $28.4bn acquisition of Slack and Adobe’s $1.5bn acquisition of Work Front
  • Financial software had some of the largest financing deals in Q4 2020 led by the $668mm financing of Robinhood, $534mm financing of Chime and $343mm financing of Molo
  • Overall outlook in software growth remains healthy, with most sectors seeing notable growth

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