By Liz Dunshee

Public capital markets are back in the strategic conversation for technology companies. The change is not limited to better IPO windows. Companies have a broader set of financing choices, investors are showing an appetite for large growth stories, and a credible public market path can give boards more leverage as they evaluate M&A and private financing alternatives.

That was the backdrop for a recent Cooley Market Talks discussion featuring Cooley Partners Dave Peinsipp and Jamie Leigh, who were joined by Edward Byun and Tegh Kapur of J.P. Morgan. The group covered the outlook for the rest of 2026 and 2027, with particular attention to late-stage private companies, public company issuers and their boards.

If you missed the Cooley Market Talks webcast, you can watch the full replay here. This recap shares observations made during the discussion, as well as practical considerations based on the panel’s insights.

More capital markets options change the boardroom discussion

The reopening of the IPO market matters even to companies that are not preparing to launch immediately. The panel described a market in which private financing, M&A and public capital are again functioning as meaningful alternatives. A credible IPO path can strengthen a company’s position in a sale process, while public status can provide liquidity, acquisition currency and continuing access to capital.

The panel also emphasized that capital formation paths are not mutually exclusive, and that the market is showing capacity to absorb very large offerings. Depending on their objectives and market conditions, issuers are using or considering multiple products, including:

  • Traditional offerings of common stock
  • At-the-market programs
  • Convertible debt
  • Mandatory convertible securities
  • Private capital and strategic transactions

Practical takeaway: Public companies should think beyond the next financing and understand which capital formation alternatives may be available to them – along with the corresponding timeframes and regulatory requirements. Shelf registration capacity, governance approvals, disclosure controls and transaction readiness can determine whether an issuer is able to issue the type of security that best fits the market when an opportunity appears. See this June 24, 2026 CapitalXchange blog for details on how recent SEC proposals may affect shelf registration processes and public company disclosure requirements, and this July 16, 2026 post on Cooley’s The Governance Beat for a look at what’s on the SEC’s near-term regulatory agenda.

The IPO recovery may be measured in dollars before deal count

Panelists anticipated substantial IPO activity through the rest of 2026 and into 2027. They differed somewhat on what that would look like. One view was that the market could continue to broaden. Another was that total proceeds may be driven by a smaller number of very large IPOs, with lingering uncertainty for mid-cap issuers.

The panel identified several reasons large private companies may be particularly well positioned to go public in the near future. They can offer scale and a clearer path to profitability, and some already have crossover investors with an interest in supporting the company in the public market. A very large company may also retain more flexibility to pursue acquisitions during IPO preparation because a target is less likely to be material to the combined business.

The speakers did not suggest that the private markets are going away. Some companies will continue to stay private longer, particularly when private financing and tender offers can address capital and employee-liquidity needs. At the same time, the panel said public market access is becoming more compelling for companies that want broad liquidity, acquisition currency and access to retail investors.

Practical takeaway: Smaller and mid-sized issuers may have more public capital opportunities in the near-term, but they should expect a demanding readiness discussion. The panel expressly focused on scale, growth quality and the path to profitability. From a preparation standpoint, companies should also consider whether they can support public company obligations and communicate a business story that will remain credible after the IPO.

Pre-IPO M&A requires an honest look at integration timetables

Late-stage private companies may pursue acquisitions for a variety of reasons, including:

  • Adding revenue, technology or talent.
  • Closing a competitive gap.
  • Strengthening their position as a future public company.

The panel noted that significant pre-IPO M&A has traditionally been completed with roughly eight to 12 months of runway for integration. These days, buyers have less control over the timetable and may need to move quickly – especially when the acquisition involves highly sought-after talent. However, pre-IPO pacing remains important. In addition to financial statement implications, a company needs time to integrate the team, and it can be difficult to do that well in the few months before an IPO roadshow.

Practical takeaway: Boards considering pre-IPO M&A should consider how integration will play out on the ground and in IPO messaging. Based on the panel’s discussion, relevant diligence questions may include:

  • Can the acquired business and team be integrated before active IPO marketing?
  • Will the required historical financial information be available and audit ready?
  • How will the transaction affect the company’s forecasts, key performance indicators and equity story?
  • What retention arrangements will be needed for critical employees?
  • Could the transaction distract management or complicate disclosure preparation?

AI infrastructure is expanding the definition of a ‘technology financing’

The current investment cycle reaches well beyond software. Demand for compute connects semiconductor companies, data centers, cloud infrastructure, power providers and other businesses that might previously have been evaluated in separate sector silos. Almost half of public market equity issuances during 2026 have come from companies that are, broadly speaking, “AI adjacent.”

The speakers said investors remain willing to finance significant capital spending because of their conviction in demand for compute. They also stressed that investors want both growth and profitability and are paying closer attention to the expected return on AI-related investment.

Five-year data highlights this shift: In 2021, each dollar of growth was worth nine times each dollar of free cash flow. Now, it’s closer to two-to-one. Investors still care about growth, but they are scrutinizing the capital required – currently and over the next 12 to 24 months – alongside the business model and expected return.

Practical takeaway: Companies raising capital for AI-related investment should pressure-test their strategy and messaging around the expected economics. Prepare to answer questions like:

  • How much capital will the strategy require over the next 12 to 24 months?
  • Will spending be funded from cash, debt, equity or a combination?
  • What operating or financial metrics will management use to measure returns?
  • What assumptions support expected demand and utilization?
  • How would the plan change if pricing, demand or implementation takes longer than expected?

Software companies need numbers behind the AI story

The panel viewed fears of a broad “SaaSpocalypse” as overdone, since investors are becoming more sophisticated about AI business models and understand that software will continue to be an integral party of the technology story going forward. However, software companies aren’t getting a free pass: Investors are trying to predict winners. To participate in a capital raise, they want to see numbers that show the strategic vision is working – such as net-new annual recurring revenue from AI products or expansion within the existing customer base.

For software companies that struggle to demonstrate a profitable position in the AI ecosystem on a stand-alone basis, M&A continues to offer an exit route. For buyers, M&A creates opportunities to scale or supercharge AI offerings. Established software companies may acquire AI-native businesses, and venture-backed companies may combine new technology with an incumbent’s customer base and distribution.

Practical takeaway: In an IPO or follow-on offering, an AI narrative may attract attention, but companies should expect investors to test it against reported results and the outlook. Management should identify the metrics that genuinely demonstrate revenue, adoption, retention or efficiency, and should avoid treating general product integration as proof of financial impact.

Defense and space technology are drawing a wider investor base

After AI hardware and semiconductors, the panel identified defense technology and space technology as two areas attracting particularly strong investor interest. The speakers tied that interest to geopolitical demand, anticipated defense spending, changes in procurement and a new generation of companies applying software and AI to products traditionally considered industrial, which appeals to a wider range of potential investors.

The new generation of defense companies is smaller and nimbler than legacy players – bringing manufacturing in-house and combining software, AI and communicating hardware. In some cases, companies are even building technologies before a government contract is awarded. The combination of industry change and technology change is creating an especially attractive area for investment – though the panel noted that at the same time, investors want to ensure that the companies they invest in are acting responsibly.

These factors are also likely to spur M&A activity over the next 12 to 18 months. Products built for a single use may find broader domestic, international or commercial applications, and companies with strong defense-contract histories may acquire technologies that were not initially defense-focused.

Practical takeaway: Companies in these sectors should expect investors and potential acquirers to examine both the technology story and the path to contracts, manufacturing scale and adjacent markets.

A healthier dual-track market should support M&A

M&A remained steady through a challenging capital markets period, although many transactions were smaller, quieter and driven by a specific strategic need. As IPOs become a more credible exit alternative, competitive dynamics are shifting into sellers’ favor. The panel predicted increased M&A activity among public companies, mid-cap companies and venture- or private-equity-backed portfolio companies.

The panel also discussed combinations between AI-native portfolio companies and established software businesses. The potential logic is to pair new technology with existing distribution, customers and scale.

Practical takeaway: A dual-track strategy provides negotiating leverage only if both alternatives are credible. Financial statements, internal controls, governance, disclosure preparation and management bandwidth should support the public market path before a company relies on it in an M&A process. See this April 1, 2026 CapitalXchange blog for more guidance on running a successful dual-track process.

Public company preparedness includes the activist playbook

A more stable market could bring renewed shareholder activism as investors return to expecting predictable growth and results. In addition to traditional levers like capital allocation and management and board effectiveness, activist arguments involving “AI washing” may also become more sophisticated.

Regular vulnerability assessments and board preparedness exercises can mitigate risks, with a constant focus on aligning company strategy, investor communications and the results the market expects. Companies that have made bold statements about AI-related efficiency or other results may face scrutiny if performance and messaging diverge.

Practical takeaway: Boards should review whether capital allocation decisions, M&A strategy, AI investment and public disclosure tell a consistent story. That review can help identify potential gaps that an activist could try to leverage.

Questions for boards and management teams

The panel’s central message was that technology companies have more capital and strategic alternatives than they have had in several years, although the market may remain more accessible to the largest companies and the strongest growth stories. The panel expects active capital markets and M&A through the remainder of 2026 and into 2027, with AI-related investment continuing to influence both.

Practical takeaway: More optionality puts a premium on preparation. For late-stage private companies, that means understanding the landscape and building IPO readiness before the market makes the timetable urgent. For public companies, advance preparation strengthens the company’s position in follow-on financings, acquisitions and potential activist engagement.

Companies should be able to explain how capital is being deployed, what returns it is producing and how the board is overseeing the risks. Boards and management teams can jumpstart their readiness by asking:

  • Do we have a public market story that is supported by current results as well as long-term opportunity?
  • Are our financial statements, controls, governance and disclosure processes ready if the window opens earlier than expected?
  • Which financing products should be available after an IPO, and what approvals or registration capacity will we need?
  • Would a proposed acquisition strengthen the IPO story or complicate readiness and integration?
  • Can we quantify the returns from AI spending and explain them consistently to investors?
  • Does our capital allocation message anticipate the questions an activist or skeptical shareholder is likely to ask?

If you want to level-up your readiness, please email the Cooley capital markets team or visit Cooley’s capital markets practice group page today. You can also visit Cooley’s IPO GO platform for resources to prepare for going public and navigate being a newly public company, including our interactive Form S-1. 

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