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Publication:

Guide for Software companies seeking Private Equity investment 2020

08 December 2020

Original content provided by BDO

Scott Rodie, Partner & Head of Global Technology, BDO Canada |

Funding for growth will be critical for many software companies looking to reach their full potential.  But how do you identify the best investment opportunities? And how do you prepare for deal negotiations, not to mention working with a PE firm – or toward earn-out targets - after the deal is signed?

This guide for software companies looks to provide answers to such questions. 

PE can be a particularly attractive source of funding and support for software companies. Analysis from BDO UK shows that private equity-backed businesses increased business revenues by an average of 53% and employment by 43% over the last five years. PE firms show great interest in software companies. Almost 40% of all PE deals completed in 2018 – 2019 fell within the technology, media, and telecoms space. In 2017, around 43% of all technology M&A deals were funded by PE. For technology M&A deals worth between $50 million and $1 billion, the figure was 52%.

While the global pandemic has temporarily slowed investments, deal flow will likely return to high levels in the near future. PE firms across the globe sit on large amounts of capital and have a short window to deploy it. Simultaneously, the need and demand for software companies’ solutions look set to increase rapidly, as the need for accelerated digital transformation is evident across all industries.

However, PE investment can, if approached incorrectly, be a risky way of raising capital. PE firms have goals and focus that can differ from other investors – and potentially yours. Knowing how to prepare for a PE acquisition, what firms are looking for, how to negotiate the optimal deal and collaborate with the PE firm post-investment is crucial. In this guide, BDO experts give their advice on how you can achieve the best results.