Application Development and Deployment Market Update – March 2025

SaaS Transition Propels Application Development and Deployment M&A

Capstone’s latest Application Development and Deployment Market Update reports that the Application Development and Deployment sector has experienced significant disruption stemming from technological advances and shifting deployment methodologies. Heightened demand for cloud-hosted applications has been at the forefront of this disruption as developers have increasingly required nimble, on-demand software solutions. Many sector participants have transitioned to a Software-as-a-Service (SaaS) model to capitalize on elevated cloud spending and deliver subscription-based tools to streamline application development, testing, security, and deployment. This transition undoubtedly contributed to record-breaking sector merger and acquisition (M&A) activity as buyers increasingly pursued targets with recurring revenue derived from subscription-based SaaS offerings.

M&A activity in the Application Development and Deployment sector reached a record high in 2024, with 432 transactions announced or completed. This represents a year-over-year (YOY) increase of 10.2%. In comparison, 2024 dealmaking in the broader M&A market declined 5.8% YOY and the Technology, Media & Telecom (TMT) industry experienced a modest YOY uptick of 2.2%, according to Capstone’s Q4 2024 Capital Markets Update. A persistent strategic and private equity (PE) buyer pool contributed to elevated levels of sector M&A activity, with both buyer groups engaging in competitive bid processes to capitalize on digital transformation tailwinds. Strategic acquirers continued to comprise the majority of sector transactions in 2024. However, sponsor dealmaking in the space rose 26% YOY in 2024. Robust dry powder levels, an easing Private Credit market, and interest rate cuts supported PE firms’ ability to transact throughout the year.

M&A valuations in the Application Development and Deployment sector remained strong as buyers demonstrated a willingness to acquire scalable technology products and services providers in high growth verticals such as Software Testing. The average sector M&A EBITDA multiple in 2024 rose six turns YOY. In addition, total disclosed deal value in the space jumped 29% YOY in 2024. The Software segment comprised the vast majority of total disclosed sector M&A spend, illustrating acquirers’ appetite for global software providers serving a variety of geographic markets.

The Software Testing market has drawn strong acquisition interest, primarily driven by the maturation of the space and participants’ shift from a license & maintenance model to SaaS-based offerings. The transition to SaaS has often provided software testing companies with increased revenue visibility, attracting a healthy pool of strategic and PE buyers. Capstone has witnessed this trend first-hand, advising LDRA on its sale to FSN Capital-backed TASKING Germany in February 2025.

Also included in this report:

• TMT industry CEOs’ outlook and revenue expectations for 2025, according to Capstone’s 2024 Middle Market Business Owners Survey.
• A breakdown of historical M&A purchase multiples in the Application Development and Deployment sector.
• Why the Software Testing market has received elevated M&A attention, including notable transactions and active buyers in the space.
• What drove a rebound in sector equity financing activity in 2024 and which vertical drew the majority of growth capital.

Capstone Partners’ Technology Investment Banking Team provides M&A, capital formation, and financial advisory services to the owners of middle market businesses in the Application Development and Deployment Market. Our team partners with leading mid-to-large sized consumer businesses that serve growing end-markets. For more information on the trends featured in our Application Development and Deployment Market Report or to speak with one of our Technology Investment Banking Team members about how to grow, value, and/or sell your company, we are here to help. Contact us today to start a conversation.