Wall Street is bracing for a software M&A frenzy after Salesforce's Demandware deal (CRM)

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Salesforce just announced a $2.8 billion deal to buy Demandware, an e-commerce software maker.

The purchase is a big deal for Salesforce: It's the biggest acquisition the company has ever done in its 17-year history. It also opens up Salesforce to the massive e-commerce market, the one missing piece in its suite of cloud service that ranges from sales and marketing to data-analysis software.

But the acquisition also highlights a bigger trend that could shake up the software industry: increased deal-making that could spark an M&A frenzy among big players like Microsoft and Oracle.

"The acquisition speaks more to the fact that the M&A environment is as robust in software as we've seen at any point in the past three to four years," Stifel's research analyst, Tom Roderick, told Business Insider. "I think the derivative impact of this acquisition will be a very interesting question: Who does Oracle buy next? What about Microsoft?"

The buying activity for software companies has certainly picked up this year after seeing a relative slowdown over the past few years. In April, Oracle scooped up two cloud-software makers, Textura and Opower, for $663 million and $532 million, respectively, while private-equity firms bought smaller players, like Marketo and SciQuest, this month.

In fact, Salesforce CEO Marc Benioff said that this year has been the "most intense M&A season" he's ever seen in an interview with CNBC's Jim Cramer on Wednesday.

All in all, there's been 22 software acquisitions in the first five months of this year, outpacing the total number of software deals in each of the past four years, according to UBS.

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UBS's research analyst, Brent Thill, tells us that the deal-making activity will only increase, especially in the cloud-software space, as more big companies find their growth potential attractive. On top of that, a lot of the cloud-software makers, broadly known as the software-as-a-service (SaaS) market, saw their valuation get compressed over the past six months, despite showing robust top-line growth.

Thill wrote in a note on Wednesday:

Over the last two months, M&A activity in software (SaaS specifically) has meaningfully picked up in both deal sizes and volumes relative to prior years, highlighting the strategic importance of maintaining a portfolio of high quality software assets. We expect that the current pace of M&A will continue, given the short list of high quality SaaS/software assets in the market.

And don't expect the consolidation to happen only among public companies. As Jason Green of Emergence Capital told us previously, even high-profile startups could find themselves in such a situation as the tech-IPO market slows down.

"We're now starting to see this kind of second wave of companies emerge. And with some of the late-stage financing becoming a little more questionable, I think companies are going to become much more aggressive on the M&A front," Green said.

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