Private equity faces ‘freeze zone’ as AI fears stall exits

Private Equity Faces Reckoning Over Buyout Backlog

The global private equity industry is confronting an uncomfortable truth at its annual SuperReturn conference in Berlin this week: years of holding onto assets purchased at peak valuations have created a logjam that can no longer be ignored, and some firms may not survive the workout.

Victor Khosla, founder of credit investor Strategic Value Partners, told Bloomberg that “there are entire sectors like private equity, like real estate, which are constipated — they can’t sell,” adding that “private credit just joined the party a little bit too.”bloomberg

A Triple Shock Stalls Recovery

The industry entered 2026 expecting a rebound. Instead, Bain & Company concluded in its midyear report, released June 8, that a “triple shock” has stalled the global private equity recovery that was “gathering momentum at the start of this year,” dampening dealmaking, fundraising, and exit activity in the first half.bain

Bloomberg-compiled data show the value of sales by private equity firms is down roughly a fifth this year. Software — long the favored asset class for buyout firms — has been hit hardest. The value of global software acquisition deals fell to $50 billion in the first five months of 2026, down from $88 billion in the same period last year, according to PitchBook data reported by the Financial Times.ft

The selloff in software stocks, driven by fears that AI tools will render traditional enterprise products obsolete, has left firms that invested more than $1 trillion in the sector over the past five years questioning whether these assets are sellable at anything close to their marked valuations.wealthmanagement

Pressure to Compromise — or Disappear

At SuperReturn, executives acknowledged that price cuts are now inevitable. Douglas Hallstrom, a managing director at Advent International, said there is “mounting pressure to monetize this backlog of 2021 deals, even if they can’t be crystalized at peak valuations.”wealthmanagement

EQT and TA Associates have pulled planned exits of software assets, while Partners Group last week capped withdrawals on an $8.6 billion evergreen fund — the first major sign of contagion from credit anxiety into private equity proper. Bert Janssens, co-head of EQT’s private capital business, said limited partners are now telling firms outright: “We have enough software exposure, so we don’t want you to add to that. We’re in a little bit of a freeze zone.”reuters

The Wall Street Journal reported in January that while consolidation among private equity firms is rising, structural barriers and limited demand for struggling shops mean few rescuers are stepping forward.wsj

An Existential Question

Alberto Gallo, chief investment officer at Andromeda Capital Management, offered perhaps the bluntest assessment at the conference. “At the core of the private capital equation is a broken promise. These managers have promised higher returns than they can deliver,” he said. “While you have many ways to delay losses and reduce transparency given the freedom you have to not mark to market your assets, at some point, the bill comes. And we’re getting there.”wealthmanagement