I am excited to share the Q3 2025 edition of the BMO Software Market Update. This quarter, in addition to our perspectives on the current macro environment and recent capital markets activity, we also feature a deep dive on the current state of the Tech IPO landscape.
The macro environment continues to evolve amid ongoing geopolitical and monetary policy uncertainty. Jerome Powell’s dovish Jackson Hole speech on Aug 22nd signaled a likely rate cut in September, absent a meaningful change in the trajectory of key economic indicators. This news catalyzed an equity market rally, notwithstanding the continued uncertainty regarding the inflationary impacts of tariffs and softness in the labour market.
Equity indices are closing out the summer on a high note, with major indices fully recovering the losses incurred in early April and hitting all-time highs – the S&P 500 and NASDAQ are up [11]% and [12]% YTD, respectively. We are seeing a strong IPO backdrop with significant momentum building into the post-Labor Day window which is expected to put us on pace to have the most active year since 2021. Investors have made it clear there is appetite for risk-on opportunities and are ready to act on a strong pipeline of new issuers across Technology verticals. The last three months have seen a number of successful Software listings, led by Figma’s cohort leading post-IPO performance. BMO acted as a bookrunner on four of this summer’s IPO’s including active bookrunner roles on Accelerant’s $832mm IPO and McGraw Hill’s $415mm IPO.
M&A activity has accelerated over the past several months, as stock markets have recovered and surpassed record highs. Global M&A deal value in the first half of 2025 far exceeded the past two years (+33% vs. 2024 and + 53% vs. 2023) despite fewer announced transactions—as average deal sizes have expanded due to dramatically higher numbers of mega-deals. Private equity focus on intrinsic value has resulted in a significant take private activity. Strategics with strong fundamentals and differentiated technology are announcing transformative acquisitions and/or targeting bolt-on acquisitions to enhance top-line growth trajectory and go-to-market offerings. Tech sector global M&A transaction grew 28% in the first half of 2025, with additional growth in the third quarter from mega-deals, including Thoma Bravo’s $12.3 billion acquisition of Dayforce, Palo Alto Network’s $25 billion acquisition of CyberArk, and CoreWeave’s $9.6 billion deal with Core Scientific.
Leveraged Finance market conditions have improved significantly post-Liberation Day. High Yield and Leverage Loan Index levels have returned to above where they were prior to the tariff-driven sell off, while fund inflows and a relatively light amount of new money issuance bolstered the technical backdrop. The Leveraged Loan market that recorded its busiest month ever with $221bn in July, led by repricing transactions for well supported credits, and has seen over $260bn of priced volume QTD. The High Yield market also has been open for issuers across the ratings spectrum with over $60bn of supply priced QTD. We expect a strong opening to both markets in September following the seasonal late August market break.
BMO remains highly active in client engagements across M&A, financing, and other strategic initiatives and will be pleased to answer any questions or provide further insights.
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