Key Takeaways
- • The Lincoln Private Market Index rose 1.9% in Q2 2026, recovering most of a 2.2% Q1 decline, driven by earnings growth rather than valuation multiple expansion—signaling a return to fundamentals-based value creation in private markets.
- • Enterprise value multiples on new buyouts contracted to 12.0x EBITDA in H1 2026 from 12.8x a year earlier, though remain elevated relative to the 11.5x long-term average, reflecting moderating valuation discipline.
- • Private-company revenue and EBITDA growth accelerated sequentially to 6.9% and 5.6% year-over-year respectively, demonstrating underlying operational strength despite macro headwinds.
- • Lender takeovers of distressed companies reached $22.3 billion in H1 2026—nearly matching the full-year 2025 total of $24.2 billion—signaling elevated credit stress in the portfolio.
- • Software loan valuations diverged sharply by leverage profile: loans above 50% loan-to-value traded at 87.1% of par versus 99.0% for those below 35% LTV, indicating selective repricing and differentiated risk assessment across leverage tiers.
Summary
Private markets stabilized in the second quarter of 2026 as fundamental earnings growth replaced valuation multiple expansion as the primary driver of index gains. The Lincoln Private Market Index increased 1.9% in Q2, recovering the majority of a 2.2% decline in Q1, according to the University of Chicago Booth School of Business analysis. The recovery underscores a shift in value-creation dynamics: private-company revenue grew 6.9% year-over-year and EBITDA expanded 5.6%, both figures accelerating from the prior quarter, demonstrating that operational performance rather than multiple inflation is lifting portfolio values.
Valuation discipline has tightened measurably across the market. Enterprise value multiples on new buyouts compressed to 12.0x EBITDA in the first half of 2026, down from 12.8x in the comparable 2025 period. While the current multiple remains above the long-term average of 11.5x EBITDA, the contraction signals that sponsors are moderating purchase price assumptions and focusing capital on businesses with demonstrable earnings power. Steve Kaplan of the University of Chicago Booth School of Business characterized the quarter as marking "a return to the LPMI's long-term pattern: private company enterprise value growth was driven by operating performance, not multiple expansion."
Credit stress indicators, however, remain elevated. Lenders took control of companies representing $22.3 billion in pre-takeover principal during the first half of 2026—a pace that nearly matches the full-year 2025 total of $24.2 billion, suggesting sustained portfolio distress and elevated default activity. This concentration of lender takeovers underscores bifurcated market conditions: while growth-stage and well-capitalized portfolios are generating solid operational returns, leverage-stressed assets continue to deteriorate.
The software sector exemplifies this divergence. Loan valuations have fractured along leverage lines: loans with loan-to-value ratios exceeding 50% averaged 87.1% of par value, while those below 35% LTV traded at 99.0% of par. Ron Kahn, managing director and co-head of Lincoln International's valuations and opinions group, noted that adjustments to software valuations are "not one size fits all," reflecting the market's granular risk reassessment. This bifurcation signals that investors are pricing meaningful default risk into higher-leverage software credits while maintaining confidence in lower-leverage counterparts.
Valuation discipline has tightened measurably across the market. Enterprise value multiples on new buyouts compressed to 12.0x EBITDA in the first half of 2026, down from 12.8x in the comparable 2025 period. While the current multiple remains above the long-term average of 11.5x EBITDA, the contraction signals that sponsors are moderating purchase price assumptions and focusing capital on businesses with demonstrable earnings power. Steve Kaplan of the University of Chicago Booth School of Business characterized the quarter as marking "a return to the LPMI's long-term pattern: private company enterprise value growth was driven by operating performance, not multiple expansion."
Credit stress indicators, however, remain elevated. Lenders took control of companies representing $22.3 billion in pre-takeover principal during the first half of 2026—a pace that nearly matches the full-year 2025 total of $24.2 billion, suggesting sustained portfolio distress and elevated default activity. This concentration of lender takeovers underscores bifurcated market conditions: while growth-stage and well-capitalized portfolios are generating solid operational returns, leverage-stressed assets continue to deteriorate.
The software sector exemplifies this divergence. Loan valuations have fractured along leverage lines: loans with loan-to-value ratios exceeding 50% averaged 87.1% of par value, while those below 35% LTV traded at 99.0% of par. Ron Kahn, managing director and co-head of Lincoln International's valuations and opinions group, noted that adjustments to software valuations are "not one size fits all," reflecting the market's granular risk reassessment. This bifurcation signals that investors are pricing meaningful default risk into higher-leverage software credits while maintaining confidence in lower-leverage counterparts.
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