Who Buys Software Companies, and Why
Software is at the center of modern M&A activity. Whether it’s private equity firms rolling up niche vertical solutions, Fortune 500 strategics acquiring complementary platforms, or industrial incumbents buying technology to accelerate digitization, one thing is clear: software companies are highly prized assets.
But who exactly is buying these companies and why? The answer varies depending on the buyer’s profile, investment horizon, and strategic priorities.
1. Private Equity Buyers: The Power of Recurring Revenue
Examples include Vista Equity Partners, Thoma Bravo, Clearlake Capital, Francisco Partners, and Nordic Capital
Private equity firms have emerged as the dominant force in software acquisitions over the last 15 years. Their appetite is driven by one fundamental factor: predictable, recurring revenue streams.
Key Drivers:
Resilient cash flows: Subscription-based SaaS and maintenance contracts provide stability even during economic downturns.
High margins: Software gross margins often exceed 70%, leaving ample room for operational optimization.
Scalability: Once acquired, companies can be expanded regionally or into adjacent verticals with relatively low incremental costs.
Why Software Has High Margins: Software scales differently from most industries. Once built, the cost to deliver to additional customers is negligible; no raw materials, supply chains, or incremental production costs. Combined with subscription-based SaaS models, which provide predictable recurring revenue, gross margins often exceed 70–80%. These unit economics make software uniquely attractive to private equity investors.
Typical Playbooks:
Platform + Roll-up: Buy a market leader in a niche (the “platform”), then bolt on smaller players or complementary products to expand capabilities.
Operational value creation: Improve sales efficiency, modernize cloud infrastructure, or cut redundant costs.
Financial engineering: Leverage debt to amplify returns, made possible by software’s stable cash flows.
PE firms are often less concerned with visionary product innovation and more focused on predictability, operational discipline, and exit potential.
Thoma Bravo, one of the most prominent private equity firms in the software sector, agreed in 2025 to acquire Verint Systems in a deal valued at about $2 billion, including debt. Verint is best known for its customer engagement software, analytics, and automation solutions, mission-critical tools for large enterprises seeking to optimize call centers and customer operations. The acquisition is a textbook example of the private equity playbook. Verint’s strong base of recurring revenue and sticky enterprise relationships made it a predictable cash generator, well suited for leveraged buyout structures.
For Thoma Bravo, the value creation opportunity lies in improving Verint’s operational performance and optimizing its product portfolio. That could mean modernizing cloud deployments, tightening cost structures, or layering in new AI-driven capabilities. Importantly, the firm can also look to bolt on acquisitions of complementary products to expand Verint into adjacent markets, building a larger platform. This deal underscores why PE investors gravitate toward software: the combination of resilient revenue, high margins, and scalability creates a foundation for outsized returns when paired with disciplined execution.
2. Strategic Acquirers: Expanding Markets and Capabilities
Large technology and software companies are also prolific buyers. Their motives are often different from financial sponsors: strategic alignment outweighs pure financial return.
Key Drivers:
Product expansion: Buying complementary modules rather than building them. For example, Adobe acquiring Figma to enhance collaboration offerings.
Market entry: Acquiring footholds in new regions or verticals.
Technology acceleration: Buying proven IP to shorten innovation cycles (cloud-native, AI, or cybersecurity).
Customer access: Expanding into new buyer personas within existing customer bases.
Strategics often place a premium on synergies, the ability to cross-sell, upsell, and drive stickier customer adoption. They are more likely to pay higher multiples than PE if the acquisition strengthens competitive positioning.
In 2018, SAP made headlines when it acquired Qualtrics, the experience management software company, for roughly $8 billion just days before Qualtrics was set to go public. The move was emblematic of how strategic buyers use M&A to expand their product portfolios. SAP had long dominated the ERP and financial systems space but faced pressure to enhance its capabilities in customer and employee experience management. By acquiring Qualtrics, SAP could suddenly offer customers an integrated suite that connected operational data with experience data, creating a differentiated value proposition against rivals like Oracle and Salesforce.
This deal also highlighted the willingness of strategic acquirers to pay premium valuations for assets that create synergies. SAP’s massive global customer base provided an instant distribution channel for Qualtrics, and the acquisition positioned SAP as a more complete enterprise platform. The risks, however, were equally clear: Qualtrics had a fast-moving, product-led culture that risked being stifled inside a giant like SAP. Balancing autonomy while extracting synergies became one of the central challenges of the integration. The case illustrates the strategic buyer’s mindset: it isn’t about efficiency alone, but about accelerating innovation, strengthening customer lock-in, and reshaping competitive positioning.
3. Corporate Buyers Outside of Tech: Owning the Digital Future
Perhaps the most interesting trend in recent years is the rise of non-software corporations acquiring software companies. These buyers span industries like healthcare, automotive, logistics, financial services, and manufacturing.
Why They Buy Software:
Control over mission-critical technology: Reducing reliance on third-party vendors.
Differentiation: Offering digital solutions alongside core products or services. For example, auto manufacturers investing in mobility platforms and connected car software.
Data and analytics: Acquiring platforms that unlock customer insights or enable AI-driven operations.
New revenue streams: Monetizing technology as a standalone product offering.
These acquisitions are often strategic bets on digital transformation. Recognition that owning software is no longer optional but essential for long-term competitiveness.
When Google announced in 2019 that it would acquire Fitbit for $2.1 billion, it was stepping well beyond its core advertising and cloud businesses and into the world of consumer health and wearables. The acquisition gave Google immediate entry into the crowded wearable device market, where competitors like Apple and Samsung were already entrenched. Fitbit brought not only a strong brand and tens of millions of users but also a trove of health and fitness data that Google could leverage to bolster its ecosystem of consumer services. The move demonstrated how corporate buyers outside of traditional enterprise software use acquisitions to accelerate their digital strategies.
The deal, however, also exposed the complexities of such cross-sector acquisitions. Regulators in the EU and elsewhere scrutinized the transaction due to concerns over consumer privacy and Google’s potential use of sensitive health data. Beyond regulatory hurdles, Google faced the operational challenge of maintaining Fitbit’s hardware supply chain while ensuring the software experience integrated seamlessly with Android and Google’s own fitness initiatives. The acquisition illustrates how corporations outside of pure software see software and digital platforms as essential differentiators in their industries, but also how difficult it can be to capture the intended synergies when culture, regulation, and business models collide.
4. Growth Equity and Venture Capital: Fueling the Next Stage
Examples include Andreessen Horowitz, Sequoia Capital, Insight Partners, Tiger Global Management, and Accel
Not every acquisition is a full buyout. Growth equity firms and later-stage venture capital players often acquire majority or significant minority stakes in software businesses.
Motivations Include:
Doubling down on winners: Backing proven growth-stage companies to accelerate expansion.
Pre-IPO positioning: Helping companies scale governance, infrastructure, and go-to-market before going public.
Founder liquidity: Allowing early investors or founders to partially exit while staying involved.
Strategic recapitalization: Restructuring the balance sheet to prepare for larger acquisitions or expansions.
These investors are more growth-oriented than PE, tolerating higher burn rates if revenue acceleration and market capture are achievable.
After SAP’s high-profile acquisition of Qualtrics, the company changed hands again in 2023 when Silver Lake Partners, together with CPP Investments, acquired it for $12.5 billion. Unlike SAP, which had bought Qualtrics to expand its enterprise software portfolio, Silver Lake approached the deal as a growth equity investor. The firm saw Qualtrics as a still-growing platform in the experience management space with room to scale globally, expand its cloud adoption, and deepen its enterprise footprint. Silver Lake’s investment thesis centered not on synergies with an existing business but on accelerating Qualtrics’ independent growth trajectory.
The transaction also served as a recapitalization, giving SAP liquidity while positioning Qualtrics for a new chapter of expansion under focused ownership. Silver Lake’s strategy likely involved doubling down on product innovation, exploring adjacent market opportunities, and fine-tuning go-to-market execution. This move demonstrates how growth equity players look for businesses with strong fundamentals but untapped potential. Companies that are already leaders in their space but could capture far more value with the right capital, governance, and operational discipline. Unlike private equity’s efficiency-driven playbook, growth equity bets on scaling winners.
Why Software Is a Universal Target
Across all buyer categories, the reasons for buying software companies converge on several common themes:
Predictability: Recurring revenue models provide clarity in cash flow forecasting.
Margin profile: High gross margins translate into scalable profitability.
Customer stickiness: Mission-critical software embeds itself into customer workflows, reducing churn.
Scalability: Cloud platforms allow for global reach with limited incremental cost.
Innovation leverage: Software often enables new business models for the acquirer.
These traits make software one of the most valuable and competitive asset classes in M&A.
The Investor’s Dilemma: Price vs. Potential
The strength of the software M&A market also means valuation multiples remain high compared to traditional industries. Buyers must carefully weigh:
Growth vs. profitability: Is the company scaling fast enough to justify investment, or is it better suited for margin optimization?
Modernization needs: Legacy technical debt, outdated infrastructure, or poor DevOps practices can materially affect value creation.
Integration risk: Will the product, team, and culture integrate smoothly with the acquirer’s strategy?
Savvy acquirers know that the real work begins post-acquisition. Modernizing technology, strengthening security, scaling the product roadmap, and aligning go-to-market strategies to realize synergies.
Executive Takeaway
Who buys software companies? In today’s market: everyone, from private equity to strategics to industrial incumbents. Why? Because software has evolved from being a support tool into the core enabler of competitive advantage, recurring revenue, and enterprise value creation.
The buyers may differ in their strategies, but the underlying truth is consistent: owning the right software assets can redefine growth trajectories, reshape industries, and create durable shareholder value.