Key Takeaways
- • US private equity invested $545.1 billion in the first half of 2026, on pace to match 2025's $1.1 trillion, but across only 3,926 deals versus 9,350 for all of 2025, according to KPMG, signaling fewer but larger transactions.
- • US exit value reached $273.1 billion at midyear across 508 transactions, well below 2025's pace of 1,376, while sponsor-to-sponsor sales fell to 94 in the second quarter, the fewest in at least a decade.
- • US sponsors raised $159.6 billion across 223 funds through June, roughly in line with 2025, with experienced managers taking $139.3 billion and emerging managers $20.3 billion.
- • A $285 billion selloff in software, legal-tech and data-provider stocks on February 3, 2026, following Anthropic's AI agent releases, exposed sponsors' software holdings, with the S&P Software & Services Select Industry Index down 25% between the Cowork launch and February 23.
- • Data centers were the clearest bright spot, with S&P Global counting 113 transactions worth more than $69 billion in 2025, a record, and regulatory developments including Rutledge v. Clearway and a Labor Department 401(k) proposal shaping the outlook.
Summary
Private equity has faced a difficult 2026, with a war in the Persian Gulf, an oil-price spike, a Federal Reserve that may raise rates, and an AI-driven selloff all weighing on sponsors, according to a Foley & Lardner LLP analysis. The author argues the industry is not broken: capital continues to flow to firms that return cash, the best assets are still finding buyers, and the law has mostly moved in sponsors' favor this year.
Activity has concentrated rather than collapsed. KPMG reports US private equity investment of $545.1 billion in the first half, but PitchBook puts second-quarter deal value at $177.3 billion, down 37.5% from the first quarter, with software deal value down 65.7% year over year. Exits are the principal pressure point, with sponsor-to-sponsor sales at their lowest quarterly count in at least a decade. Fundraising has held roughly steady, but Bain & Company reports global buyout fundraising fell 16% to $395 billion in 2025, a fourth straight annual decline, while deployment recovered on size. PitchBook data show 2017 to 2021 vintages with distributions to paid-in capital below 1.0 times, underscoring that the return problem is one of cash rather than asset value.
Energy and power are leading sector investment, with KPMG placing private equity energy and natural resources investment at $90.2 billion through June. Data centers have produced the clearest returns, led by the $40 billion sale of Aligned Data Centers. Software remains selective: the February 3 selloff, triggered after Anthropic released Claude Cowork and related plugins, wiped roughly $285 billion from software, legal-tech and data-provider market value in one session. Bank for International Settlements figures place private credit's software loan book above $500 billion, or 19% of direct loans. In private credit, three Blue Owl business development companies sold $1.4 billion of loans at 99.7% of par after one suspended redemptions, which the author characterizes as a liquidity mismatch rather than a credit loss.
On exits, PwC counts roughly $114 billion raised in traditional IPOs through June, while CBIZ estimates more than 13,500 US companies sit in sponsor portfolios. On the legal front, the article highlights a Labor Department proposal of March 30 on 401(k) access to private equity, a pending Supreme Court case in Anderson v. Intel, Delaware's Rutledge v. Clearway decision of February 27 upholding a controller safe harbor, and a UK change taxing carried interest as income from April 6. The author concludes that sponsors should sell good assets, grow earnings, and prepare for a higher return bar, with Bain describing the new deal math as "12 is the new 5."
Activity has concentrated rather than collapsed. KPMG reports US private equity investment of $545.1 billion in the first half, but PitchBook puts second-quarter deal value at $177.3 billion, down 37.5% from the first quarter, with software deal value down 65.7% year over year. Exits are the principal pressure point, with sponsor-to-sponsor sales at their lowest quarterly count in at least a decade. Fundraising has held roughly steady, but Bain & Company reports global buyout fundraising fell 16% to $395 billion in 2025, a fourth straight annual decline, while deployment recovered on size. PitchBook data show 2017 to 2021 vintages with distributions to paid-in capital below 1.0 times, underscoring that the return problem is one of cash rather than asset value.
Energy and power are leading sector investment, with KPMG placing private equity energy and natural resources investment at $90.2 billion through June. Data centers have produced the clearest returns, led by the $40 billion sale of Aligned Data Centers. Software remains selective: the February 3 selloff, triggered after Anthropic released Claude Cowork and related plugins, wiped roughly $285 billion from software, legal-tech and data-provider market value in one session. Bank for International Settlements figures place private credit's software loan book above $500 billion, or 19% of direct loans. In private credit, three Blue Owl business development companies sold $1.4 billion of loans at 99.7% of par after one suspended redemptions, which the author characterizes as a liquidity mismatch rather than a credit loss.
On exits, PwC counts roughly $114 billion raised in traditional IPOs through June, while CBIZ estimates more than 13,500 US companies sit in sponsor portfolios. On the legal front, the article highlights a Labor Department proposal of March 30 on 401(k) access to private equity, a pending Supreme Court case in Anderson v. Intel, Delaware's Rutledge v. Clearway decision of February 27 upholding a controller safe harbor, and a UK change taxing carried interest as income from April 6. The author concludes that sponsors should sell good assets, grow earnings, and prepare for a higher return bar, with Bain describing the new deal math as "12 is the new 5."
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