Software & SaaS 2024 Outlook

Updated: May 31, 2024

Reflecting on 2023

Trading multiples experienced a downward trend up to the beginning of Q4 followed by a slight uptick across all subsegments during the late 2024 public markets rally. Anticipated improvements in revenues and EBITDA performance are projected over the next twelve months, with a positive trajectory in EBITDA for '24, reflecting leaner operating models following headcount and SG&A rationalization in the preceding periods. Improving interest rate sentiment during Q4 extending into 2024 and pent-up demand for capital from the muted software market in 2023 is expected to bring strong deal-making conditions in 2024.

2024 Outlook

Rebound in Deal Activity – Anticipated surge in deal activity is expected in 2024 driven by a substantial amount of dry powder in the market following a year of uncertainty. Improving consensus on the near term outlook for inflation and interest rates is poised to further boost activity, especially in the context of stabilized interest rates, rendering smaller deals attractive for buyers with a strategic focus.

Solutions Drive Deals – Technological solutions and capabilities will drive acquisitions, with key areas of focus including digitization to improve supply chain resiliency and reporting software for ESG (Environmental, Social, Governance) garnering disproportionate interest given increased standards on transparency.

The Importance of Security in Software – A heightened focus on cybersecurity is expected due to persistent threats from bad actors and advancements in sophisticated technology and generative AI, with urgent solutions sought through strategic acquisitions to address demand to provide protection from threats or attacks.

A focus on Application and Systems Software – Software companies, particularly in application and systems software, are emerging as attractive targets, as expected by equity research firms including JP Morgan and Guggenheim Securities. Despite high valuations for in-demand assets in this sector, they exhibit lower price sensitivity compared to other industries.

Dedicated to creating positive and impactful change for our clients.

Experience in M&A, corporate finance, business valuation, and private company operations, Bonfire Capital aligns stakeholder interests and delivers exceptional client experiences. Our collaborative approach, rooted in advising and managing private companies mitigates transaction risk. We bring a flexible approach to mandate scopes and are recognized for being nimble and relatable.