Private Equity's Strategic Bet on Enterprise Software: Cross-Border Value Creation and Sector Consolidation in the Post-Pandemic Digital Economy

In the post-pandemic digital economy, private equity (PE) firms have increasingly positioned enterprise software as a strategic asset class, leveraging cross-border investments and sector consolidation to drive value creation. From 2023 to 2025, macroeconomic headwinds-including inflation, rising interest rates, and shifting CIO priorities-have reshaped the landscape, yet software's resilience in maintaining strong EBITDA margins and recurring revenue models has made it a focal point for PE capital, according to McKinsey. This analysis explores how cross-border deals and consolidation strategies are redefining the sector, supported by quantitative trends and case studies.

Macroeconomic Realities and Sector Resilience

The post-pandemic period has been marked by volatility. In 2023, over 500 software deals valued at $100 billion were recorded, but enterprise valuations declined by 25% in 18 months, particularly in fintech and e-commerce, as the McKinsey report shows. However, cybersecurity, data analytics, and automation emerged as priority areas for CIOs due to their near-term ROI, the same McKinsey analysis finds. By 2025, PE activity rebounded, with Q1 deal volume reaching $35.7 billion-27% above the five-year quarterly average-driven by AI-as-a-Service platforms and vertical SaaS, according to EisnerAmper.

Software's structural advantages-such as low capital intensity and scalable cash flows-have enabled it to outperform other PE sectors historically, with a 25% higher IRR from 2008 to 2021, the McKinsey report notes. Despite challenges, 2024 saw U.S. software deal value surge 32.4% YoY, reflecting renewed investor confidence, per EisnerAmper.

Cross-Border Value Creation: Diversification and Geopolitical Strategy

Cross-border deals have become a cornerstone of PE strategy, enabling firms to diversify geopolitical risk and access fragmented markets. For instance, Thoma Bravo and Vista Equity Partners have executed multi-billion-dollar acquisitions across borders, such as Thoma Bravo's €9.3 billion purchase of Anaplan and Vista's €8.6 billion acquisition of Avalara, a trend highlighted by Morgan Stanley. These transactions highlight a focus on vertical integration in sectors like cybersecurity and supply chain management, as noted by Morgan Stanley.

In 2025, cross-border activity intensified as firms strengthened ties with EU and APAC partners. A notable example is Synopsys' $35 billion acquisition of Ansys, a cross-border consolidation aimed at accelerating AI chip development, described in the Dakota report. Similarly, CoreWeave's $9 billion takeover of Core Scientific expanded GPU-native cloud capacity, addressing AI workloads globally, as the Dakota report details.

Sector Consolidation: From Fragmentation to Scale

Enterprise software's fragmented nature has made consolidation a primary value driver. By 2025, PE firms held $330 billion in dry powder, fueling take-private deals and secondary buyouts, according to EisnerAmper. For example, Permira and Blackstone's $13 billion acquisition of Adevinta and Vista Equity's $8.4 billion take-private of Smartsheet underscored the appeal of consolidating digital platforms, as reported in the Dakota report.

Consolidation strategies are also reshaping operational dynamics. In 2024, private equity accounted for nearly double its share of public-to-private tech deals compared to 2020–2022, EisnerAmper documents. This trend is driven by PE's ability to optimize costs, streamline operations, and invest in R&D, making targets more attractive to strategic buyers, the EisnerAmper analysis argues. However, critics note that cost-cutting measures-such as reducing back-office staff-can degrade customer service and innovation pipelines, a concern raised in the McKinsey report.

Valuation Dynamics and Regulatory Shifts

Valuation multiples have normalized since the 2021 peak, with median EBITDA multiples correcting to 12.4x in Q1 2025, the Dakota report shows. This reflects a more disciplined approach as PE firms navigate higher interest rates and extended holding periods. To meet target IRRs, sponsors are prioritizing operational improvements over multiple expansion, such as deploying AI-driven tools for cash flow forecasting and liquidity optimization, the McKinsey report recommends.

Regulatory shifts further complicate the landscape. The Trump administration's deregulatory policies have eased antitrust scrutiny for mid-market tech mergers, encouraging roll-ups in fragmented segments like HR tech and legal tech, EisnerAmper observes. Conversely, global tax reforms-such as the OECD's GLoBE framework-have altered cross-border deal structuring, increasing complexity for PE-backed tech firms, the Dakota report explains.

Future Outlook: AI, Infrastructure, and Exit Strategies

Looking ahead, AI and digital infrastructure will dominate PE strategies. In 2025, firms are investing in AI tooling to enhance productivity and in data centers to support AI workloads, a trend EisnerAmper highlights. Additionally, secondary buyouts and continuation funds are gaining traction as exit routes, given the constrained public market environment, Morgan Stanley suggests.

For investors, the key lies in balancing short-term operational efficiency with long-term innovation. As EisnerAmper notes, "The best-performing software companies will be those that align with PE sponsors capable of driving both capital deployment and strategic transformation."

Conclusion

Private equity's strategic bet on enterprise software is a testament to the sector's adaptability in a volatile macroeconomic climate. Cross-border deals and consolidation have enabled firms to navigate challenges while capitalizing on digitalization trends. However, success hinges on navigating valuation corrections, regulatory shifts, and the delicate balance between cost optimization and innovation. For investors, the post-pandemic era presents both risks and opportunities-those who align with agile, operationally focused PE sponsors will likely reap the rewards.