Buyers pay up for software they think AI makes more essential

Software has spent much of 2026 as the sector investors feared artificial intelligence would hollow out. In October, buyers answered with cheque books. Salesforce agreed on 20 October to buy the customer-engagement platform Braze for about US$5.66bn, paying US$47.50 a share in cash, a premium of roughly 58% to the previous close. Braze shares jumped more than 50% on the day. Five days earlier Proofpoint, owned by Thoma Bravo, had agreed to acquire the data-security group Varonis for about US$6.3bn, and on 22 October London Stock Exchange Group agreed to pay US$3.535bn in cash for the credit-intelligence provider Octus.

The three deals share a theme. Each buyer is paying for data, workflows or controls that it argues become more valuable, not less, once AI agents start acting inside companies. Reuters described the Braze deal as Salesforce's latest push to accelerate its AI transition at a time when investors worry that rapid adoption of the technology could erode demand for traditional software.

Paying up for the right kind of software

Salesforce said Braze would bring real-time, cross-channel engagement into its Marketing Cloud, Data 360 and Slack products. Braze serves about 2,770 customers, including Canva, Instacart and Venmo, according to Reuters. The deal follows Salesforce's earlier AI-related purchases, among them the US$8bn agreement for Informatica in 2025. Salesforce would owe Braze a US$300m termination fee if the deal collapses, and Braze would owe US$191.4m if it walks away. Closing is expected in Salesforce's fiscal year 2028.

Proofpoint's case for Varonis rests on the same logic applied to security. AI agents need broad access to documents and systems to be useful, which can expose sensitive information when permissions are loose. Varonis maps where sensitive data sits and who can reach it. The price of US$49.75 a share values the company at about 8.4 times trailing revenue and 53 times free cash flow, and is 52% above the share price on 22 June, before the first reports of a sale. Calcalist noted that Varonis shares had fallen by about half in a single day in October 2025 after weak results, and touched an intraday low of US$19.70 in April 2026.

LSEG's purchase of Octus, formerly Reorg, from funds advised by Permira adds proprietary credit and restructuring intelligence to its data business. Octus expects more than US$300m of revenue in 2026 with an adjusted EBITDA margin of about 40%, and LSEG is funding the deal with external debt.

A market splitting into winners and losers

The headline numbers suggest a busy market, but the activity is uneven. Mergermarket data published by ION Analytics in July showed global software M&A of US$623bn in the first half of 2026, up about 65% on a year earlier and the highest since 2022, with large AI-related transactions driving much of the value. Sponsor activity moved the other way: software buyouts fell 54% to US$52bn and sponsor exits fell 69% to US$102bn, both the lowest since 2020.

Bankers told ION Analytics that every software sale now depends on its AI story. Sascha Pfeiffer of Houlihan Lokey estimated that high-quality assets which once commanded annual recurring revenue multiples above ten times now trade at about 4.5 to 8 times. Investors increasingly sort companies by exposure: systems of record, proprietary data and security tools are seen as better protected, while departmental tools and point solutions face more risk.

October's deals fit that pattern. The targets sit in data, security, identity and industrial software rather than generic productivity tools. Workday agreed this month to buy C1, formerly ConductorOne, which governs access for employees and AI agents, and Automation Anywhere agreed on 7 October to buy the Norwegian conversational-AI company Boost.ai from Nordic Capital. Earlier in the month Schneider Electric agreed to pay US$205 a share, about US$22.6bn in equity value, for PTC, the largest software deal of the period.

What the premiums say

Strategic buyers are willing to pay large premiums because the shares they are buying have fallen so far. Varonis's offer is 17% above its 1 September price but far below its 2025 peak. Braze's 58% premium was calculated on a share price that had been pushed down by the same AI worries Salesforce says it is addressing. The market has not always approved: Schneider's shares fell sharply after the PTC announcement as investors questioned the price and the equity raise needed to fund it.

Private equity remains active mainly where it already owns a platform. Thoma Bravo is backing Proofpoint's bid with committed equity, and Ontario Teachers' Pension Plan has agreed to invest alongside it.

None of these transactions has closed. Proofpoint and LSEG both expect completion in the first half of 2027, and Salesforce's deal needs shareholder and regulatory approval. For now, October has shown that buyers will pay well for software they believe AI makes more essential, while the rest of the sector waits to find out which side of that line it falls on.