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Software

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Fundamentals

Size Analysis: During the quarter, the market capitalization increased to $85 trillion, being a decrease from the previous period. The number of reporting companies also saw a decline of 3,856 companies contributing to the market cap this quarter. Transaction counts in the industry fell, continuing an 8-quarter trend. The total value account for $127 billion.

Public Market Dynamics: The year-over-year returns for the largest 20 companies in the industry saw an increase to 61.51%, contrasting with the industry's overall returns of 6.10% and the smallest 20 companies' stagnant returns of 0.00%. The industry's performance was less than the SPY index's 19.50% increase, with a -13.41% deficit, yet it displayed an incremental rise of 1.23% from the last quarter. This suggests a positive trend since Q4 2022. Key financial indicators, such as debt-to-equity ratio and interest expense to revenue, alongside profitability metrics like gross and net profit margins, were consistent, indicating a steady financial position for the industry.

Transaction Trends: The industry has witnessed a persistent decline in transaction volume over eight consecutive quarters. Despite this overall reduction, the Power & Electricity sector has maintained its prominence in investment activities, with a focus on IPOs and buybacks. The total transaction value experienced a decrease, settling at $89.798 billion in the last quarter, reflecting the market's cautious stance amidst risk, as highlighted by the significant Discounts for Lack of Marketability noted among public companies.

Dispersion Insights: In Q4 2023, North America was the predominant region for revenue in the sector, followed by Asia and Africa. The majority of mergers and acquisitions took place in North America, with Europe and Africa also showing significant activity. Private placements were more prevalent than public offerings, with a notable level of activity in North America and Asia. For public offerings in Q4, the trend shifted; Asia increased its number of offerings, while North America experienced a decrease, reflecting a dynamic change in the investment landscape of the industry.

Methodology

We screened CapitalIQ using its industry classification. Transactions were filtered by announce date within the last 3 years. Companies were filtered by having a public company type. The main industry selected was "Information Technology". CapitalIQ sector "Software and Services" was used to screen the database. CapitalIQ subsectors "IT Services" and "Software" were used as categories. Our sectors were defined by the CapitalIQ primary industry classification.

THIS REPORT IS NOT TO BE USED OR CONSIDERED UNDER ANY CIRCUMSTANCE BY ANYONE AS INVESTMENT ADVICE

This research report is for informational and discussion purposes only. Information presented here is not investment advice of any kind to any person and does not constitute a recommendation as to the purchase or sale of any interests or as to any other course of action. General, financial, and statistical information concerning the details of this report and related industry are from sources Spaulding Financial believes to be reliable.

Spaulding Financial has accurately reflected such information in this research report; however, Spaulding Financial makes no representation as to the sources’ accuracy or completeness and has accepted this information without further verification. Neither all nor any part of the content of this report may be conveyed to the public through advertising, public relations, news, sales, mail, direct transmittal, or other media without the prior written consent of Spaulding Financial. Spaulding Financial ’s research is as of the date reported herein.

Spaulding Financial has no affiliation with any of the companies comprising the industry used as a basis for research in this report, nor does Spaulding Financial hold any investments in the companies listed herein. The content of this report may be used, in part, as a basis for any work that Spaulding Financial performs for you in the future at the sole discretion of Spaulding Financial. All data is from Capital IQ database.

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