The Twisted Notions of Private Equity's Valuation of Software Companies

The combination of science and art that is used to value a company can lead to distorted numbers.

The tendency of Private Equity firms to focus on near term investment returns may fly in the face of long term competitiveness.

Software companies, even modestly successful ones are attractive acquisition targets for both private and public buyers. They are attractive to Private Equity (PE) firms primarily because they are highly profitable, have eleva…