A $1.4 billion hedge fund expects a newwave of tech M&A, particularly in software, as new kinds of buyers come to the fore."The types of companies looking to acquire software businesses have expanded well beyond ... traditional acquirers" like private equity firms and Oracle and IBM, Praesidium Investment Management wrote in aletter to clients last week. Enterprise software makes up 40% of the fund's portfolio, according to the letter."We believe that we are now in the early part of a major M&A wave that will be more intense than any period in the past,"Praesidium's Kevin Oram and Peter Uddo wrotein the note. A copy was reviewed by Business Insider.The deals can be a boon for the buying companies. According to New York-based Praesidium, that's because "the acquirer in most software transactions can normally cut 40-60% of the operating costs of the companies they acquire in a relatively short period of time."Here's more from Praesidium'sletter on the shift taking place:"Technology companies like, Cisco, Google, and even Microsoft, who didn't buy manyenterprise software companies in the past, are also now aggressively bidding for softwareassets. Further, major industrial companies, like GE, Siemens, and Honeywell see a significant opportunity to sell software that their customers are increasingly using to control, monitor, analyze, and service the industrial equipment these companies provide. These industrial firms recognize the value they can create in their own businesses by developing high-margin, recurring software-driven cash flow streams from their huge installed bases of equipment. As a result, they are all allocating tremendous amounts of capital towards software acquisitions and internal investments."The fund returned 17.6% net of fees last year compared to a 11.9%gain in the S&P 500, including dividends, according to the letter.This year, the fund was up3.8% net of fees through February and currently manages about $1.4 billion firmwide, a person familiar with the matter said.Praesidium isn't the only fundopining on the future of tech M&A. Samantha Greenberg's Margate Capital told clients earlier this yearthat it expected "hundreds of billions of dollars" in deals.Bankers at Goldman Sachs alsopreviously told Business Insiderthat they're having a record year for tech dealmaking.SEE ALSO:A hotly-tipped hedge fund expects 'hundreds of billions of dollars' in tech dealsJoin the conversation about this storyNOW WATCH: A penthouse owned by Trump's trust is on the market for $35 million ' here's a look inside
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