Interview Jean-Baptiste Brian - Partner Hg

In this interview, Jean-Baptiste Brian, Partner at Hg, analyzes the evolution of the software sector and its growing appeal to private equity. Long perceived as a market that was too niche, too technology-intensive, or too dependent on human talent, software has become one of the most sought-after sectors in the private market thanks to its recurring revenue streams, growth potential, and resilience.One of the key structural shifts stems from the transition from the license-maintenance model to the subscription model. This shift has enhanced revenue visibility and strengthened business models, particularly for mission-critical software used daily by companies. The sector has also experienced growth far exceeding expectations, particularly in Europe, where many software publishers have become global players. Sector-specific expertise is a key advantage for investing in software. It enables a better understanding of market dynamics, helps avoid certain mistakes already observed, and supports management teams with practical expertise. At Hg, this specialization is also supported by an in-house operational team—particularly in cybersecurity, cloud, and artificial intelligence—that supports portfolio companies in their transformation challenges. The transition to the cloud remains a key driver of value creation, although its progress varies by sector. More regulated or industrial markets may still lag behind, while certain software solutions are already largely cloud-based. Artificial intelligence represents both an opportunity and a threat. It can improve productivity, accelerate R&D, optimize customer support, and facilitate code modernization, but it could also undermine software with little differentiation. For Hg, the best-positioned software is that which combines functional depth, criticality, and access to strategic data. These characteristics are expected to become even more decisive with AI. The sector’s high valuations remain justified when revenue and profit growth are solid, but AI could eventually widen the gap between essential software and more basic solutions.