Software and Technology Monthly Newsletter

In This Edition:

• January 2025 in Review

• Step Aside ChatGPT, there’s a new sheriff in town

• Public Market Dashboard

• Mergers and Acquisitions

January 2025 in Review

January 5 - Microsoft to spend US$80B on building data centres in 2025, further underlining the capital requirements of AI.

January 9 - Microsoft lays off a small percentage of jobs (less than 1%) across departments based on performance. The company had 228,000 employees at the end of June 2024.

January 10 - RBC partners with Toronto based enterprise AI firm Cohere to develop generative AI products for the financial industry focused on risk and security.

January 29 - The Bank of Canada cuts interest rates by 25 basis points to 3%, the sixth consecutive cut implemented. 

January 31 - The federal government announced it is deferring the implementation of its change to the capital gains inclusion rate from June 25 of this year to Jan. 1, 2026. The increased inclusion rate on the capital gains tax was initially proposed in the federal government’s budget last April. 

Step Aside ChatGPT, there’s a new sheriff in town

On January 27th, the technology sector saw its worse day in the stock market in nearly 5 years. The largest decline was NVIDIA, which fell by over 17%, shedding ~US$600B in market cap. Investors were taken aback by the latest release from DeepSeek, a Chinese based AI model firm. DeepSeek’s capabilities appear to rival ChatGPT but the company claims its models were developed at a fraction of the cost. This revelation suggests that market-leading AI models are possible with dramatically less computing power, which sent shockwaves throughout the global tech and power generation industries. The US dominance of the AI sector has been brought into question. Many pillars of the new AI market could be thrown out the window if Deepseek assertions are proven to be true. We investigate DeepSeek and how it may influence the future of AI below:

What is DeepSeek?

Chinese startup DeepSeek was founded in late 2023 by a hedge fund manager turned entrepreneur. DeepSeek is a free AI-powered chatbot that uses less memory than its rivals, which consequently reduces the overall costs to perform tasks. DeepSeek’s researchers claim the latest model was developed for only US$6MM. With the U.S. banning advanced semiconductor chip sales to China since October 2022, DeepSeek was built using less costly and less sophisticated NVIDIA chips. The NVIDIA H800 chip, which was designed to comply with US export controls, were allowed to be exported to China until October 2023. DeepSeek’s arrival and early success have challenged Silicon Valley’s assumption that billions of capital spending is required to be at the forefront of AI.

We prepared a comparison between ChatGPT’s parent, OpenAI and DeepSeek below:

The Impact on the Future of AI

With DeepSeek challenging ChatGPT’s dominance, it is undeniable that competition within the AI space is intensifying globally. Despite security, privacy and data source concerns over DeepSeek, the model appears to be capable of rivalling Mega Tech dominance in the space to date. In addition to fostering a decentralized AI ecosystem, the increase in competition should spur innovation among AI companies to drive further improvements in model cost, accuracy and efficiency. The common occurrence in tech over the past decades has been the constant decline in the cost of the underlying technology, which seems to be now underway for AI models as well.

The emergence of DeepSeek appears to signal a broader shift in the AI landscape. It is likely that even more options will surface for businesses and consumers. We at Whitehorn anticipate additional competitors will enter the space and we expect the race to now prioritize cost efficiency and reduced energy consumption. However, we look forward to OpenAI’s response and we expect this will lead to higher ROI’s and a range of exciting features, options and products that will potentially drive the sector to new heights!

 It would be foolish to bet against ChatGPT’s parent, OpenAI as well as they seek to further innovate and stay ahead of the curve.

Finaincing

Below we summarized a few recent tech financing transactions:

Tech Private Equity Funding

Notable financing transactions involving software and tech private equity include:

Public Market Dashboard - January Returns

Mergers and Acquisitions

Jan 2 – Ryan (NYSE:RYAN) acquires Toronto based Altus Group’s property tax business. $700MM acquisition of global property tax services and software provider to accelerate transformation to a pure-play commercial real estate software, data and analytics platform.

Jan 2 – Thomson Reuters (TSX:TRI) acquires Ann Arbor, MI based cPaperless. $600MM acquisition of US tax and accounting software firm operating under the SafeSend name with 235 employees to enhance offerings for accounting professionals.

Jan 3 – Bermuda based UIL acquires Carebook Technologies (TSXV:CRBK). Acquisition of digital health solutions provider by its largest shareholder in a going-private transaction.

Jan 3 – Irish firm Trane Technologies acquires Montreal based BrainBox AI. Acquisition of cleantech startup specializing in reducing the carbon footprint for commercial buildings with AI tools with 190 employees to integrate offerings into its HVAC systems.

Jan 7 – Boucherville, QX based Centrix One acquires Granby, QC based Boom CRM. Merger between AI-powered CRM platform provider and CRM SaaS provider focused on user experience, engagement and adoption.

Jan 7 – Toronto based 1Password acquires UK based Trelica. Acquisition of data insights firm into SaaS usage to expand capabilities of its Extended Access Management platform.

Jan 7 – Shopify (TSX:SHOP) acquires Shop.ca domains. $0.5MM acquisition of shop.ca and shop.us domains from Emerge Commerce (TSXV:ECOM) to expand digital marketplace presence.

Jan 7 – Minneapolis based SPS Commerce acquires Toronto based Carbon6 Technologies. $301MM acquisition of e-commerce software aggregator focused on merchants selling directly on Amazon and through its third-party marketplace.

Jan 7 – Winnipeg based IntouchCX acquires Irvine, CA based WebPurify. Acquisition of AI-powered content moderation solutions provider to enhance offerings and expand capabilities.

Jan 8 – Australian firm Employment Hero acquires Toronto based Humi. Acquisition of employment platform provider consisting of payroll, HR and benefits to expand geographic presence and to enhance offerings.

Jan 8 – Salt Lake City based CallTower acquires Montreal based Inoria. Acquisition of contact centre as a Service provider, integrator and managed services provider to expand customer experience and conversational AI capabilities.

Jan 9 – Toronto based Volaris Group acquires Welsh firm agentOS Proptech Group. Acquisition of property management software solutions provider to extend property management technology.

Jan 9 – Santa Clara, CA based Eltropy acquires Montreal based Lexop. Acquisition of debt collections technology provider to enhance self-serve solution offerings.

Jan 14 – Fort Lauderdale, FL based ACR Group acquires Ottawa based APS Aerospace. Acquisition of flight data analytics software and services provider primarily for airline safety programs, investigation authorities and maintenance activities to enhance technology offerings.

Jan 14 – Kitchener based Uvaro acquires Toronto based Lighthouse Labs. Acquisition of tech education company offering cybersecurity, data science, data analytics and web development training to create national platform and network to address workforce challenges.

Jan 16 – Vancouver based Carnivore Club acquires Toronto based Carnivore business assets. $0.5MM acquisition of the Canadian and US business assets of Carnivore Club from Emerge Commerce (TSXV:ECOM).

Jan 16 – Markham, ON based Vertus Group acquires Pittsburgh based Aptech. Acquisition of financial software technology provider for the hospitality industry.

Jan 16 – Etobicoke, ON based Myant acquires Toronto based Bitnobi. Acquisition of privacy-protected data sharing software provider to bolster healthcare solutions.

Jan 17 – Toronto based Blue Door Agency acquires Toronto based Bridge Digital. Acquisition of data driven digital marketing solutions agency specializing in website development, social media management and SEO/SEM to expand services and bolster client portfolio.

Jan 22 – Singapore based Virtuos acquires Montreal based Umanaïa Interactive. Acquisition of majority stake in Games-as-a-Service company with over 40 senior developers to further drive innovation.

Jan 22 – Toronto based Omegro acquires Swiss company Data Consulting. Acquisition of business software and managed services provider and ERP for small to medium municipalities, associations and private sector energy customers vertical to expand municipality offerings.

Jan 23 – New York based Lowy Family invests in Blackline Safety (TSX:BLN). $20MM strategic investment in industrial IoT services provider including connected safety devices and predictive analysis to further strengthen balance sheet and to enhance growth.

Jan 23 – Montreal based Equisoft acquires Atlanta, GA based VisCalc. Acquisition of SaaS illustration software provider for small to mid-sized life insurance carriers to strengthen service offerings for the small and mid-sized carrier market.

Jan 23 – Montreal based Fresche Solutions acquires San Francisco based OmniData Insights. Acquisition of Microsoft Gold-certified leader specializing in AI-enabled Data and Analytics modernization to diversify portfolio of solutions and to reinforce data analytics offerings.

Jan 23 – Durham, NC based BlueMatrix acquires Toronto based Street Context. Acquisition of communications and intelligence centralization platform provider around investments and capital markets by market intelligence platform provider to deliver more targeted communications to the client base of financial institutions.

Jan 24 – Salt Lake City based GoEngineer acquires Toronto based CAD MicroSolutions. Acquisition of communications and intelligence centralization platform provider around investments and capital markets by market intelligence platform provider to deliver more targeted communications to the client base of financial institutions.

Jan 24 – Telus (TSX:T) acquires Dartmouth, NS based City Wide Communications. Acquisition of internet, home phone and TV services provider to residential customers by subsidiary, Altima Telecom.

Jan 24 – Entheon Biomedical (CSE:ENBI) acquires Denver based Mentis AI. Acquisition of R&D company focused on the acquisition and development of AI technologies aimed to assist mental health patients.

Jan 28 – Montreal based Nuvei acquires Japanese firm Paywiser Japan. Acquisition of payment solutions technology firm to expand into Japan.

Jan 28 – Montreal based Plutera Capital acquires Montreal based Hardbacon. Acquisition of the assets of fintech and budgeting app provider following the latter’s bankruptcy filing at the end of 2024.

Jan 28 – HIVE Digital Technologies (CVE:HIVE) acquires Paraguay based Bitcoin mining facility. $85MM acquisition of Bitcoin miner Bitfarms Ltd.’s partially completed 200 megawatt (MW) hydro-powered Bitcoin mining facility in Yguazú to expand global mining capacity.

Jan 29 – CGI (TSX:GIB-A) acquires UK based BJSS. Acquisition of technology and engineering consultancy specializing in IT solutions, software engineering expertise and delivery with over 2,400 professionals to increase UK presence.

Jan 29 – Calgary based EECOL Electric acquires Bothell, WA based Industrial Software Solutions. Acquisition of exclusive distributor of AVEVA's industrial automation software solutions in Western Canada and the Pacific Northwest to expand offerings across Western Canada.

Jan 29 – Rockwell Automation (NYSE:ROK) acquires Kitchener, ON based Clearpath Robotics. Acquisition of autonomous robotics innovator specializing in autonomous mobile robots used in industrial applications to strengthen autonomous technology offerings.

Jan 30 – CGI (TSX:CGI) acquires German firm Novatec. Acquisition of IT services firm specializing in agile software engineering, digital products and strategic business & IT consulting with over 300 personnel in eight offices across Germany and Spain.