Abstract
The article summarizes the last 30 years of the M&A market in the software industry. The authors verify a hypothesis if the takeover strategy is still effective and promising. A dataset of over 18,000 transactions was analyzed. It has been noticed that while company valuations and the S&P 500 index have been increasing over the last decade, the frequency of transactions in the software industry has decreased.
Highlights
Most innovations nowadays come from software or software-intensive products and services that bring the main innovation outcomes for many companies
This paper investigates the last 30 years of mergers and acquisitions in the software industry with a hypothesis to explore if the takeover strategy is still valid and promising and what the implications that can be derived for the software business are
The second peak can be observed in 2007 with 949 merges, following a decrease to around 700 mergers and acquisitions in the following years, due to the big financial crisis that started in 2007 (Acharya, 2009). All these movements were strictly connected to the global market condition and correlated to the merger waves noticed in the market (Martynova & Renneboog, 2008)
Summary
Most innovations nowadays come from software or software-intensive products and services that bring the main innovation outcomes for many companies. An example here may be the S&P 500 index, where software companies are among the top performing companies. These companies have enormous financial resources and the ability to hire top talented people to work for them. For many successful startups, being acquired by a larger firm is the final goal and exit strategy. This strategy allows the startup owners to cash-out their investment and the acquirer company to obtain an innovation that has proven to be promising for customers and investors. Many acquirers decided to purchase a company instead of creating a similar product and directly competing on the market
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