PE Pins Hopes on Cluster of Software IPOs

As I wrote earlier today, private equity firms are sitting on a backlog of software companies they bought during the buyout frenzy of 2021 and 2022 that they hope to take public or sell. 

One reason they can’t cash out is that the initial public offering market has not been receptive to new PE-backed software listings. The value of all PE-backed software companies totaled just $17 billion from 2022 to 2024, less than one-fifth of the deals in 2021, according to PitchBook. 

That lukewarm appetite may extend into this year, thanks to the distraction of the planned  blockbuster IPO of SpaceX and expectations that OpenAI, Anthropic and Databricks could follow.

“Generally speaking, I think the environment for PE-backed IPOs is going to be more difficult than [that for] VC-backed ones, with the exception of certain vertical software and security companies,” said Jonathan Cofsky, a technology portfolio manager at mutual fund manager Janus Henderson.