Private equity technology deal activity has fallen sharply as artificial intelligence reshapes valuation expectations and increases uncertainty around software business models, according to report by Bloomberg citing Bain & Company analysis of Dealogic data.
Global buyout deal value in the technology sector declined by around 70% in the first quarter to roughly $20bn, reflecting a marked slowdown in large-scale transactions and a broader reassessment of pricing in software and digital assets. The contraction coincided with an estimated 8% decline in software company valuations, compared with relatively stable pricing across other sectors.
The data points to a significant cooling in technology-focused private equity dealmaking after several years of elevated valuations and limited exit activity. Sponsors have increasingly struggled to sell assets at or above entry multiples, compounding pressure on portfolio returns and slowing capital recycling back to investors.
Bain’s global private equity leadership noted that the current environment reflects a combination of macroeconomic uncertainty and sector-specific disruption risk, particularly in software-as-a-service models where AI is reshaping competitive dynamics and cost structures.
Despite the downturn, Bain emphasised that the issue is not a lack of capital. Dry powder remains elevated, credit markets remain accessible, and broader equity markets continue to perform well. Instead, the firm characterised the situation as a “confidence gap,” with investors more cautious about pricing and forward earnings assumptions.
The slowdown follows a period in which private equity firms have already faced extended holding periods and weaker-than-expected exit volumes. Average holding periods have stretched to six to seven years, compared with three to four years in earlier market cycles, reflecting difficulties in monetising assets acquired during the 2020–2021 investment peak.
This has contributed to a growing backlog of portfolio companies, many of which are now being held longer than originally anticipated. Even alternative exit routes such as continuation vehicles are facing increased scrutiny from limited partners, who are applying greater diligence to valuation assumptions and long-term return expectations.
According to Bain, a significant portion of current buyout portfolios was acquired prior to 2022, meaning many assets are now being re-underwritten in a materially different macro and technological environment.
While higher-quality assets continue to attract buyer interest, older holdings with uncertain growth trajectories or elevated entry valuations are proving more difficult to exit. As a result, the industry is increasingly focused on adapting underwriting frameworks to incorporate AI-related disruption risk and recalibrated growth assumptions.
