Analysis-Software selloff is disrupting some M&A and IPO deals, US bankers say

Core Insights - A significant selloff in software stocks is hindering deal-making and IPOs in the sector, as volatility leads to unreliable valuations and cautious buyers [1][2] - The S&P 500 software and services index has experienced its worst three-month performance since May 2002, with software stocks down approximately 25% from their peak on October 28, while the S&P 500 index itself is up 1% [1][2] - The decline in software share prices has made it difficult for buyers and sellers to agree on valuations, with sellers reluctant to transact at low levels and buyers fearing overpayment for assets that may further decline in value [2][3] Market Dynamics - Anxiety surrounding artificial intelligence's impact on software business models is contributing to market volatility, with investors trading based on fear rather than a detailed analysis of company fundamentals [4] - The repricing of software companies is evident in recent deals, such as Brex, which was valued at over $12 billion during a funding round but sold for approximately $5.15 billion [5] - OneStream went public at a valuation near $6 billion but was taken private for about $6.4 billion, indicating limited gains for investors [6] Deal-Making Challenges - The volatility in the market complicates price negotiations, making it more challenging for dealmakers to reach agreements [7]