Global Software Sector Market Alert – April 2020

Global Software Sector Market Alert – April 2020

We are currently experiencing an unprecedented market environment with the onset of COVID-19-related social distancing, and lockdowns across the world resulting in a complete slowdown of economic activity. COVID-19 has introduced a level of unpredictability not previously seen by investors, and it continues to drive sustained levels of market volatility. Certain sub-sectors of tech (online travel, ridesharing, etc.) have been hit especially hard. While segments of the enterprise software market are core enablers of remote working and accordingly are seeing an uplift in utilization, the sector is not immune to broad sell-offs.
 
Pagemill Partners-tracked software vertical indices have experienced drops of up to c.30% from their peak. Even less volatile large-cap vendors have experienced a sizeable drop in share price with our Large-Cap Index trading at c.17% below its peak. It is unclear if we have hit a bottom yet and the overall long-term economic impact of COVID-19 on public markets is yet to be determined. The impact of COVID-19 is also being felt on large-cap tech M&A with deals larger than USD 1 billion (bn) being pulled in the past two weeks (e.g. Thoma Bravo’s proposed acquisition of Imprivata) given concerns around raising debt financing and the valuation impact from the current market environment.

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