The Takeaway: A Q&A With Joy Sioufi on the European Software Sector

Europe’s software market was very active last year. What drove the momentum?

It comes down to a combination of structural factors. The first is quality. The maturity and scale of European software businesses have improved dramatically over the past decade. We’re now seeing a broadening universe of high-value assets coming to market—highly profitable, defensible platforms with recurring revenue and global relevance, operating at scale.

At the same time, the buyer landscape has expanded. In the past, once a European software company reached scale, the natural acquirer was often a U.S. corporate entity or sponsor. Today, Europe has its own established bench of private equity firms, alongside U.S. funds with well-versed European teams, that can deploy large tickets locally. These investors are building sizeable platforms capable of meaningful buy-and-build strategies, removing the traditional ceiling that once required waiting for a U.S. buyer to take a company to the next stage. Instead, there’s now a more liquid, competitive market for European consolidation.

What’s interesting is that this momentum has held up irrespective of the broader macro noise. Investors with a conviction in software are looking beyond the short-term environment, focusing on fundamentals and long-term growth potential.

The final piece is AI, which is acting as both an accelerator and a differentiator. Platforms that are AI-enabled are attracting heightened interest, while businesses without clear defensibility face closer scrutiny. AI is amplifying the premium on quality assets and pushing investors to think carefully about which businesses are truly positioned to scale and sustain growth over the long term.

Are there particular subverticals that are attracting the most interest?

It’s less about any one subsector and more about the underlying characteristics of the business. Investors are drawn to software that is mission-critical, data-driven, and AI-friendly. Assets that are deeply embedded in customer operations, difficult to replace, and generate recurring revenue naturally attract the most interest. Scale and profitability matter too—businesses that are already at size and growing trigger activity because they provide a credible platform for further expansion or consolidation.

If we zoom in slightly, areas such as healthcare software, infrastructure platforms, cybersecurity, and solutions supporting essential business functions—like office of the CFO, GRC, or legal tech—have all seen significant activity. Other verticals, such as HCM, sustainability, or hospitality-focused software, are also attractive, but demand tends to be more asset-specific rather than broadly sector-driven.

The common thread across all of these is mission-criticality, defensibility, and the ability to create habits with users, often reinforced by proprietary data or AI capabilities.

How does the French software market compare with the rest of Europe?

When we look at the French software market specifically, it’s not fundamentally different from the rest of Europe in terms of the types of assets coming to market or investor interest. That said, we saw a noticeable acceleration in deal flow in 2025, and we’ve been fortunate to be involved in a number of those processes.

Part of this is timing. Many businesses had delayed exits in 2023 and 2024, often due to broader macro or political uncertainty. As a result, 2025 became a year where a number of those planned exits actually happened, buoyed by stronger market conditions.

Looking ahead, we expect this momentum to continue through 2026. Businesses considering an exit will be looking to transact ahead of the 2027 presidential election, which introduces uncertainty around potential policy, taxation, and regulatory changes.

This timing effect, combined with sustained investor appetite and a deep pool of high-quality, scalable software platforms, is creating a pipeline of opportunities that shows no sign of slowing.

How are strategic buyers versus private equity approaching these subverticals?

When it comes to European software subverticals, the distinction between strategic buyers and private equity is becoming increasingly nuanced. Many companies coming to market today are scaled, with some already profitable, others on the verge, but the majority are growing rapidly. These businesses are evaluating a broad set of options—from minority or majority recapitalisations to full strategic transactions—and the choice depends on which route maximises value and optionality.

Private equity has emerged as a particularly active player in this environment. PE investors can deploy large tickets and support meaningful platform builds, executing buy-and-build strategies at scale. They are able to act quickly, conduct rigorous, data-driven diligence, and pay premiums for assets that are scarce, mission-critical, or defensible, knowing that if they don’t, a competitor will. In many cases, this allows PE to outcompete strategics on price, particularly when the deal offers consolidation opportunities or creates a long-term platform for growth.

Strategic buyers, on the other hand, tend to focus on operational synergies and longer-term integration, which can slow their decision-making. They are often more selective and measured, weighing how a target fits with existing infrastructure, product lines, or client relationships.

In many deals, strategic buyers—often backed by sponsors—and PE are competing in open-auction processes, where optionality and flexibility drive the market. It’s resulting in a dynamic and highly competitive environment.

What’s next for the software market as we begin 2026?

Momentum remains robust, and the market is offering compelling opportunities, which we expect to continue in the months ahead. With regulatory frameworks evolving on both sides of the Atlantic, having visibility and clarity is key, but the advice to clients is straightforward. Stay prepared, maintain optionality, and be ready to act decisively when the right opportunity arises.

Success in this environment depends on agile decision-making and a clear view of the landscape. You need to know which platforms are active in each subvertical, who is funded and ready to act, and where there is room for further consolidation. This combination of preparation, optionality, and market awareness enables investors and companies to capture opportunities as they arise, and we expect this momentum to carry into 2026 with strong market dynamics.

So, what’s The Takeaway?

Europe’s software momentum is underpinned by a growing universe of scaled, profitable, and defensible platforms, with private equity and strategics vying for high-quality assets. AI is acting as both an accelerator and a differentiator, driving premiums for mission-critical, data-rich businesses.

The takeaway for market participants is clear—maintain optionality, understand the competitive landscape, and be ready to execute decisively when the right opportunity arises.