A prolonged selloff in software stocks is beginning to disrupt mergers, acquisitions, and initial public offerings, as volatility clouds valuations and makes buyers wary, according to U.S. bankers and deal advisers. The S&P 500 software and services index has suffered its worst three-month stretch in over two decades and remains roughly 25% below its October peak, even as the broader market has held relatively steady.
Dealmakers say falling share prices are complicating negotiations. Rapid swings in valuation benchmarks such as revenue multiples make it difficult for buyers and sellers to agree on price. Buyers fear overpaying in a falling market, while sellers hesitate to transact at depressed levels. Some private equity firms predict deals will be delayed, repriced, or collapse altogether if volatility persists.
High-profile transactions illustrate the strain. Financial software firm Brex completed a funding round near its peak valuation but was later sold at a significantly lower price. Meanwhile, software provider OneStream, which went public in 2024, was taken private at a valuation only slightly above its IPO level after market turbulence weighed on its shares.
The uncertainty stems in part from anxiety over artificial intelligence reshaping software business models. Industry leaders including Morgan Stanley, Blackstone, Vista Equity Partners, and Goldman Sachs have weighed in, with some warning of near-term disruptions while others argue that long-term fundamentals remain intact.
IPO plans are also being reconsidered. Firms including Blackstone-backed Liftoff Mobile and Norway’s Visma have delayed or re-evaluated listings amid unsettled markets. Analysts warn the volatility could spill into private credit markets, where software companies account for a sizable share of lending exposure.
Despite the turmoil, some investors see opportunity. With certain public software firms trading at unusually low revenue multiples, private equity buyers are reportedly circling, suggesting the downturn may eventually spark a new wave of take-private deals once pricing stabilizes.
