Who’s next after Workday? Analyst names potential software M&A targets

Truist has highlighted a potential revival in software dealmaking with a recent report suggesting that a possible takeover of Workday could be the catalyst needed to kickstart the dormant sector. The brokerage's Terry Tillman expressed optimism, stating that a deal of such magnitude could reignite discussions around sponsor and strategic interest in software following substantial valuation compression.

While Truist acknowledges that one deal does not constitute a trend, the reported Silver Lake (Private) interest in acquiring Workday (WDAY, NR) is believed to be a major wake-up call for the industry.

According to Truist, 16 of its covered software companies have been acquired since 2019, indicating a divided buyer universe. Horizontal platforms, which appeal to both strategic and financial buyers, are positioned alongside vertical assets, which are more natural candidates for sponsorship due to their durable recurring revenue and cash generation.

The firm's "A List" of potential targets consists of names already mentioned in press reports, subjected to activist pressure, or discussed among investors. This list includes Commvault, Elastic, Five9, GitLab, HubSpot, UiPath, Varonis, and Zeta Global.

On the other hand, Truist's "B List" comprises franchises that have not been subject to significant buyout speculation. This list includes Dynatrace, Intapp, JFrog, Klaviyo, Paylocity, Qualys, and Tenable. The brokerage asserts that the most attractive assets on this list possess high recurring revenue, durable retention, embedded workflows, and credible growth roadmaps.

Infrastructure software is expected to be the primary target for buyers, owing to its crucial role in supporting AI applications. However, Truist expects ServiceNow and Atlassian to remain on the sidelines in the near term, as they are still dealing with large acquisition deals from 2025.