Software

Size Analysis: During the quarter, the market capitalization increased to $7.9 trillion, recovering from the previous period and resuming an upward trend since Q4 2022 upward trend. The number of reporting companies also saw an uptick, with 26 additional companies contributing to the market cap this quarter. Transaction counts in the industry fell, continuing an 8-quarter trend. The total value account for $122 billion. This rise suggests larger deal sizes in a market that still focuses on the Power & Electricity sector.

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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.

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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.

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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.

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.

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