Dec. 8, 2020 | Press Release

New West Monroe Study: High-Tech & Software M&A Activity Outshines Overall Market in 2020, Outlook Remains Strong

New West Monroe Study: High-Tech & Software M&A Activity Outshines Overall Market in 2020, Outlook Remains Strong

Integration, differentiation, and changing customer expectations cited as challenges to value creation

Despite disruption and economic upheaval, the appetite for deals in the high-tech & software sector has not waned during the pandemic. Private equity and corporate buyers expect deal activity to remain strong: 70% said they plan to acquire as many as two software/high-tech companies over the next 24 months, and 27% intend to make three or four acquisitions. These are among the principal findings in a new report, “High Tech M&A Defies the Odds,” released today by West Monroe and Mergermarket. 

The report explores the demand, strategy, diligence, and post-close process for buyers of high-tech & software companies. As a basis for the report, West Monroe and Mergermarket surveyed 100 private equity and corporate/strategic buyers during the third quarter of 2020. 

“A lot has changed in a short time, and so have assumptions around the models and strategies that will deliver growth and value,” said Michael Amiot, senior director in West Monroe’s mergers & acquisitions practice. “High-quality assets continue to attract high multiples. But high multiples, a crowded market, and unique integration and differentiation challenges make the path to value creation more difficult. Buyers need conviction and clear plans for long-term value creation to justify meeting valuation expectations in an uncertain market.”

Key findings of the study include:

  • Global deal value for the technology, media, and telecommunications (TMT) industry increased 21% through the third quarter of 2020, compared to the same period a year ago. Although 60% of survey respondents said they postponed or canceled plans to make a software or technology acquisition as a result of the COVID-19 pandemic, 55% said they expect their deal appetite to either increase or stay the same over the next 24 months.
  • Private equity investors in high-tech & software have primarily focused on consolidation or scaling up to increase competitiveness (74%) and transformation, for example through new intellectual property (66%). Corporate buyers are different:  Their primary objectives for recent high-tech and software acquisitions were incorporating a specific functionality or intellectual property into an organization to enable product differentiation (72%) and acquiring a new customer base (64%).
  • Subscription revenue is a priority, particularly for private equity; 40% of private equity respondents said that 50% to 70% of their tech portfolio markets goods or services to customers on a subscription basis. By contrast, half of corporate buyers surveyed report that less than 50% of their revenue comes from subscriptions. 

“Growth in subscription and software-as-a-service models have been at the center of many investment theses, with private equity investors being more aggressive in this area,” said Dhaval Moogimane, a director in West Monroe’s high-tech & software practice. “While corporate acquirers appreciate the power of subscriptions, private equity firms are better able to execute the transition to these sorts of business models. This shift can be difficult for large corporations due to investor expectations and a focus on near-term financial results.”

Additional contributors to the report include Neil Jain, director in West Monroe’s high-tech & Software practice, and Katherine Swintek, senior manager in West Monroe’s mergers & acquisitions practice. 

West Monroe is a market-leading advisor for high-tech & software companies and private equity firms. Since 2002, the firm has advised on more than 3,000 transactions and executed hundreds of post-close value creation investments for portfolio companies, many of them in the high-tech & software sector. West Monroe previously published a study on software M&A in 2017, “Software M&A Frenzy.”

About the survey
Survey respondents were equally divided between private equity and corporate/strategic buyers based in the United States. Private equity participants qualified to take the survey if they had acquired or sold three or more high-tech & software companies over the past three years. Corporate respondents qualified to take the survey if they had acquired or sold at least one high-tech & software company over the previous three years. 

About West Monroe 
West Monroe is a national consulting firm that was born in technology but built for business—partnering with companies in transformative industries to deliver real, measurable results. Technology is who we are, it is not something we bolted on overnight, and we believe it is one of the greatest enablers of business value. That’s why we work in diverse, multidisciplinary teams that blend industry expertise with deep operational and technology capabilities to create quantifiable, financial value for our clients. Our 1,300 employees based in eight offices across the United States also own 100% of our business, so when you partner with us you know we are committed—because your success is our success. Our undeniably different approach breeds undeniable results. Visit to learn more.

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