Private Equity Under the Lens: EU Exits Consultation, AI’s Impact on Risk & Valuations, and the Institutional View — 0100 Weekly Brief
Hello,
For years, private equity relied heavily on software investments. These companies offered recurring revenue, high margins, and steady growth. Many firms increased their exposure to enterprise software over the past decade, often using leverage to enhance returns.
In 2026, things are different. New AI tools are raising questions about the long-term durability of certain software business models. Some tasks handled by enterprise software may now be automated or replicated more efficiently using AI systems. This has led investors to reassess growth assumptions, margins, and valuation levels across the sector.
Public software multiples have declined, and private-market buyers are requesting broader discounts on tech-heavy portfolios. Lenders are also becoming more selective, particularly in transactions tied to software assets. As a result, exit timelines are extending, and return expectations are being adjusted.
At the same time, private equity firms are exploring how AI can improve internal processes. AI is being used to accelerate due diligence, analyze data more efficiently, and support portfolio company operations. The long-term impact remains uncertain, but AI is now influencing both risk assessment and value creation strategies across private equity.
A Correction in Motion
Shares of big private-equity and private-credit firms have dropped sharply, and it’s not only because of worries that artificial intelligence could hurt software companies. Firms such as Apollo Global Management, Blackstone, Ares Management, KKR, and TPG saw their shares peak in late 2024 or early 2025 after a long rally. Since then, their shares have fallen more than 30%, a steeper slide than many software stocks or private lending funds.
That suggests investors are worried about deeper issues.
Even without AI fears, private equity was likely headed for a slowdown. Higher interest rates, less borrowing, and a tougher market for selling companies have made strong returns harder to achieve. These firms still collect steady management fees, but their long-term growth depends on successful investments and bringing in new money.
For years, cheap debt and rising markets helped fuel gains. Now, with financing more expensive and exits harder to pull off, investors don’t expect a quick return to past highs.
This pressure ties directly to private equity’s heavy bet on software.
Software has been one of the largest and most profitable areas for private equity over the past decade, making up a significant share of many firms’ portfolios.
Firms spent years snapping up software companies because they seemed dependable and predictable. Groups like Thoma Bravo and Vista Equity Partners borrowed heavily to buy niche software providers serving call centers, hospitals, and other industries.
At the same time, rapid advances by AI developers like Anthropic have raised fears that many specialized software tools could be recreated more quickly and more cheaply using AI.
The anxiety has spread across Wall Street.
AI Risk Moves Into Private Markets
Investors are questioning how much of firms like Blackstone and Apollo have tied up in software deals struck when rates were low and valuations were high. Now borrowing costs are up, growth is slower, and AI adds another layer of uncertainty, especially for software built around routine tasks that can be automated.
While some executives argue that strong companies will adapt and use AI to improve their products, selling these businesses at premium prices may be difficult for some time.
Fears that artificial intelligence could hurt major software companies are now spilling over into private markets. Investors who once eagerly bought stakes in private equity portfolios filled with tech companies are becoming more cautious.
According to Bloomberg, buyers are now asking for discounts of up to 20% to purchase pieces of these portfolios—far steeper than the roughly 5% discounts seen just weeks earlier. The shift shows that concerns about AI disrupting business models are no longer limited to public stocks; they are affecting private deals as well.
This matters because private equity firms have poured huge amounts of money into technology and software over the past decade. If buyers demand bigger discounts to take those assets off their hands, it becomes harder for firms to sell investments and return cash to their investors.
That could slow dealmaking, reduce reported valuations, and add pressure to an industry already dealing with higher interest rates and tougher exit markets. In short, AI worries are beginning to reshape one of the hottest trades in private markets.
AI: Threat, Tool, or Both?
The Economist also argues that private-equity firms face a serious challenge as artificial intelligence threatens the very software companies that fueled their rise. Over the past decade, buyout funds poured massive sums into enterprise software businesses built on steady subscription revenue, seeing them as reliable, high-margin investments.
But now AI tools could recreate or replace many of these applications faster and more cheaply, putting pressure on growth and valuations. Because many of these deals were financed with heavy borrowing, any slowdown in performance could quickly create financial strain.
Not everyone sees AI purely as a threat.
McKinsey says generative AI could transform private markets, but only if investors use it carefully. Many firms are excited about using large language models to accelerate research and analyze deals more quickly, and most believe the technology will have a major impact within five years.
But McKinsey warns that AI tools can produce overly optimistic “happy talk,” contain factual errors, or omit critical details, especially when they rely solely on public data. In tests comparing AI-generated reports with expert interviews, important insights were often missing or contradicted. McKinsey argues that the best approach is to combine AI’s speed with proprietary research and strong internal processes. In other words, AI can help investment teams move faster, but it shouldn’t replace careful judgment and deep industry expertise.
Spotlight: EU Consultation on Private Equity Exits
The European Commission has launched a public consultation on private equity exits in the EU, highlighting growing concern about liquidity constraints in European capital markets.
Policymakers are seeking feedback on barriers to exiting private investments, including IPO delays, valuation gaps, and limited secondary market activity. The consultation also explores the potential creation of a secondary trading platform for private company shares to improve liquidity and support capital formation.
🌍 Across the Ecosystem | AI and the Repricing of Private Equity
Institutional investors, pension funds, insurers, family offices, and private equity sponsors are increasingly focused on how artificial intelligence is reshaping risk and return assumptions in private markets.
In a market where leverage is more expensive and exits are harder to execute, AI is no longer a side conversation. It is becoming central to how investors assess the durability of earnings, the sustainability of margins, and long-term growth. Below is a snapshot of how the discussion around AI-driven risk and opportunity is evolving across the private equity ecosystem, along with recent headlines shaping this debate.
📄 Article | Does Private Credit Really Have an AI Problem?
A Barron’s commentary argues that fears that artificial intelligence could trigger a crisis in private credit may be overstated. Recent reports suggested that as much as 35% of private credit portfolios face elevated AI disruption risk because many loans are tied to software companies.
That narrative contributed to sharp declines in stock prices for firms such as Blackstone and KKR and raised concerns about broader stress in the asset class. However, the author contends that markets are conflating equity risk with credit risk. Private credit lenders are not betting that software companies will thrive forever—only that they will generate enough cash flow to repay loans before maturity, which typically averages around five years.
📄 Article | Why AI Worries About Software Are Hitting Private Credit
A Morningstar article explains that concerns about artificial intelligence disrupting software companies are now affecting private credit markets. Over the past five years, private lenders increasingly favored loans to enterprise software firms because of their high margins, recurring subscription revenue, and stable customer bases.
However, as AI tools lower barriers to entry and allow customers to build their own solutions, investors are questioning whether those advantages will hold. The worry is that margin compression and competitive pressure could weaken the very business models that supported the rapid growth of private credit lending to software.
Join the Debate at 0100 Europe — Amsterdam
Roundtable Discussion: The Next Generation of Value Creation in Private Equity
As the private equity landscape evolves, value creation is becoming more multidimensional—driven by operational excellence, technology adoption, innovative deal structuring, and new approaches to capital formation.
At 0100 Europe, this discussion moves from theory to practice.
Our private, pre-registration–only roundtables convene up to 30 carefully selected participants—Private Equity GPs, LPs, and senior industry experts focused on the future of value creation.
The session opens with a 15-minute panel featuring Thought Leaders who will outline the structural challenges and emerging opportunities shaping the next generation of value creation strategies. Confirmed speakers include:
François Candelon, Partner Value Creation at Seven2
David Jones, Operating Partner at Pollen Street Capital
From April 21st to 23rd, in Amsterdam.