Key Takeaways
- • Thoma Bravo founder Orlando Bravo told CNBC on March 17, 2026 that generalist investors underwrote tech deals poorly and that "some of the excesses of 2020 and 2021 are showing themselves now," while his firm's Medallia go-private deal, a $6.4B transaction closed in 2021, has been impaired.
- • Apollo co-President John Zito told investors that "I literally think all the marks are wrong" on private equity software holdings, and estimated that a small or midsize software borrower could recover only 20 to 40 cents on the dollar.
- • UBS warned private credit default rates could rise to as high as 15% if AI triggers aggressive disruption, while Morgan Stanley forecast default rates of 8%; Ares CEO Mike Arougheti called the UBS call "absolutely wrong."
- • The author proposes ten due-diligence questions for pension CEOs and LPs, focused on covenants, PIK interest, amendments, capital structure ranking and collateral quality.
Summary
Thoma Bravo founder Orlando Bravo, speaking to CNBC on March 17, 2026, said generalist investors had underwritten technology deals poorly and that "some of the excesses of 2020 and 2021 are showing themselves now." He argued that deep sector expertise is separating winners from losers as artificial intelligence disrupts the software industry, and he drew a distinction between private equity-owned software companies and listed firms, which he said face accelerating disruption. He acknowledged that Thoma Bravo's 2021 go-private acquisition of Medallia, a $6.4B customer insights deal, was overvalued, saying the firm had overestimated its growth and that the equity had been impaired for some time. He said the other 77 portfolio companies were, for the most part, performing strongly.
The piece cites a Wall Street Journal report that Apollo co-President John Zito told investors that carrying values for private equity software deals were wrong, adding that Medallia "will be worse than people expect." Zito was more negative on private credit loans to small and midsize software companies, estimating recoveries of 20 to 40 cents on the dollar in weaker cases. The author notes that recoveries of around 40% have historically been typical for poorly chosen small-to-midsize software borrowers, and that losses near 80% usually reflect post-closing mismanagement.
On default risk, the author cites UBS, which in February put private credit defaults at 3% to 5% and warned they could reach 15% under aggressive AI disruption. Morgan Stanley forecast default rates of 8%. Ares Management CEO Mike Arougheti dismissed the UBS view as "absolutely wrong." The author argues that default rates are not the same as losses and that loose covenant structures matter more than software exposure per se. He also cites a Blackstone exposure concern tied to Jon Gray and notes that JPMorgan continues to expand its venture lending business, now serving nearly 12,000 clients, while CEO Jamie Dimon has warned of credit market "cockroaches."
The author, a former Wellington Financial LP executive, closes with ten due-diligence questions for institutional LPs, including the share of loans with performance covenants, covenant amendments, PIK interest trends, blend-and-extend amendments, sale processes, capital structure ranking, and the share of loans backed by equity rather than first-ranking asset security. The piece is an opinion column, not investment advice.
The piece cites a Wall Street Journal report that Apollo co-President John Zito told investors that carrying values for private equity software deals were wrong, adding that Medallia "will be worse than people expect." Zito was more negative on private credit loans to small and midsize software companies, estimating recoveries of 20 to 40 cents on the dollar in weaker cases. The author notes that recoveries of around 40% have historically been typical for poorly chosen small-to-midsize software borrowers, and that losses near 80% usually reflect post-closing mismanagement.
On default risk, the author cites UBS, which in February put private credit defaults at 3% to 5% and warned they could reach 15% under aggressive AI disruption. Morgan Stanley forecast default rates of 8%. Ares Management CEO Mike Arougheti dismissed the UBS view as "absolutely wrong." The author argues that default rates are not the same as losses and that loose covenant structures matter more than software exposure per se. He also cites a Blackstone exposure concern tied to Jon Gray and notes that JPMorgan continues to expand its venture lending business, now serving nearly 12,000 clients, while CEO Jamie Dimon has warned of credit market "cockroaches."
The author, a former Wellington Financial LP executive, closes with ten due-diligence questions for institutional LPs, including the share of loans with performance covenants, covenant amendments, PIK interest trends, blend-and-extend amendments, sale processes, capital structure ranking, and the share of loans backed by equity rather than first-ranking asset security. The piece is an opinion column, not investment advice.
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