• Market Trends
January 30, 2025
In our Q3 2024 update, we wrote about how the two sectors we serve — services and software — are evolving differently. We continue to see important differences.
M&A activity in the services sector remains strong heading into 2025, driving investor interest. Combined with significant sidelined investment capital, this is fostering a healthy capital market overall. Investors we spoke with in Q4 are bullish on M&A, citing a potentially favorable tax environment post-election and declining interest rates.
Overall, organic revenue growth expectations have cooled from 2022 highs as companies adjust their sales strategies. We see inorganic growth as a key lever for larger services firms looking to acquire customers or expand service offerings.
AI continues to dominate discussions, with our clients recognizing its potential to enhance the sector. While specific use cases are still emerging, we view AI primarily as a tool to accelerate service delivery rather than replacing direct headcount in the near term.
Our strategic advice to software clients is to play offense in AI, both in product development and investor messaging. While we don’t recommend rebranding as the “AI for x” company, which quickly and expectedly became passé, it is imperative that software companies address AI head-on. “Our AI Positioning and Strategy” should appear within the first three slides of any investor presentation. In our past lives as investment bankers, we did just this during the dot-com bubble, the Great Recession, and the COVID-19 pandemic. Waiting until mid-discussion to address the critical issue of the day, or only when asked, signals a lack of preparedness that can label you as out-of-touch and reactionary — and more likely to be overrun than to be a leader.
Playing offense does not mean having all the answers — no one knows exactly where the AI transition will take us. However, it does mean showing a clear commitment to AI, demonstrating a realistic understanding of your position, and outlining a strategic path forward. Our recommendation: Leverage proprietary data and established distribution channels rather than focusing solely on technology, which risks being outpaced by rapidly evolving foundational models.
If your business has big goals this year, reach out to see how we can help. In 2024, Fintelos supported more than a dozen companies with everything from forecasting and budgeting to comprehensive fractional CFO services. Learn more about our capabilities or contact us today to see what’s possible in 2025.
