Software mergers might be set to take off.

The economic slump is causing a wave of struggling businesses to list themselves for sale at lower rates, according to top investment banker Rick Sherlund of Bank of America.

The company’s vice chair of technology investment banking said on Thursday on CNBC’s “Fast Money” that “you definitely need to see greater concession.” “Companies’ value expectations will mellow, and this will be accompanied by more fully operational financial markets. This, in my opinion, will quicken the pace of mergers and acquisitions.

His thorough study follows Thursday’s $20 billion acquisition of design platform Figma by Adobe. Wall Street didn’t get excited about Adobe. Questions over the price tag caused a 17% decline in its share price.

During the 2000 tech bubble, Sherlund, a former software analyst who ranked first on Institutional Investor’s all-star analyst list 17 times in a row, worked at Goldman Sachs. He thinks that the Street is currently in the early stages of a challenging market cycle.

As corporations will be reporting lengthening of sales cycles, he said, “you need to go through third quarter earnings reports to feel sure that maybe the bad news is mostly out into the market.” “We must reevaluate our goals for 2023.”

In the M&A market, Sherlund and his team are very active.


Private equity firms have an abundance of capital, but Sherlund observed that they require functional loan markets in order to leverage their deals. They are aggressively examining this sector and are really enthusiastic. It implies that, in the case of M&A, there won’t be an IPO market, hence the industry would likely experience a lot more consolidation.

He points out that growing inflation and interest rate pressures have harmed the IPO.

The “IPO market” is closed. You will see a lot of companies go public when the window does open back up, he continued.

According to Sherlund, the long-term prospects for software are very promising.

You need to have a strong belief in the sector’s long-term fundamentals, according to Sherlund. Every business is evolving into a digital enterprise.