Private equity deal activity ran into another mid-cycle stall as a fresh wave of shocks in 2026 widened pricing gaps and slowed both buying and selling. 

In a report entitled "Control the Controllable, Weather the Rest: Private Equity Midyear Report 2026," Bain & Company said the pullback has been broad, with only a narrow slice of top-tier assets still attracting premium bids.

The report noted that early 2026 started with improving momentum for buyouts before three disruptions hit in quick order: an AI-driven shakeout in software, strains tied to redemptions in private credit, and a conflict involving Iran that pushed oil higher. Bain also described wider bid-ask spreads, more cautious investment committees, and weaker exit traction as uncertainty returned.

Even with the slowdown, "the global economy remains in expansion mode," pointing to functioning debt markets and a global economy that remains in growth mode, the report noted.

"Given the growing pressure to buy and sell companies, it wouldn't take much to unlock a wave of new dealmaking in the year's second half. But a truly sustained upturn in activity will likely depend on the market finding an equilibrium that lasts more than a quarter or two. There's no question the fog will lift eventually—it always does. In the meantime, though, the general partners (GPs) positioning themselves to lead out of the slump are focusing on what they can control now, not what they can't," the report said.

Limited Partners (LPs) are taking "practical steps to boost exit momentum." They are leaning into AI, "not just as a risk management or cost-cutting tool, but as a means to develop new products, create new revenue opportunities and sharpen decision making.”

"With holding periods stretched, firm resources constrained, and disruption a constant, the premium is on specialization, operational capability, talent, and execution discipline. The hard work done in market troughs to develop these competitive attributes is often what determines who leads in the next cycle."

Technology Deals Face Pressure

Technology was a key pressure point in the first quarter. The report cited a steep drop in tech deal value from late 2025, as investors struggled to pin down what software businesses are worth in an AI-disrupted landscape. Bain pointed to a sharp February slide in public software valuations as a signal of how unsettled expectations became, even as some transactions still reached the finish line.

For private holdings, Bain referenced proprietary MSCI work indicating software marks in buyout portfolios fell by about 8% through the end of March, with a smaller decline in Europe (4.3%) than in the U.S. (8.9%). 

Many firms are responding by "transforming how they diligence assets and underwriting both risk and revenue opportunity" to account for AI-related risks and potential revenue upside, while others are shifting attention toward businesses viewed as less exposed to near-term automation and geopolitical swings. Buyers have shown more interest in companies with physical or labor-intensive elements and in businesses with revenue streams tied more closely to domestic demand, the report noted.

High Costs Weigh On Buyouts

Costs remain a central hurdle. Buyouts are unusually expensive due to high purchase multiples and elevated financing costs.

"Deals are arguably as expensive today as at any other point in the industry's history. This ‘deal cost index’—combining purchase multiples and financing costs—is in record territory, which dramatically underscores the imperative to generate operational value creation and earnings growth. Investors need conviction not only around the risks they are taking but also around the long-term value and exit potential of the businesses they are buying," the report stated.

As a near-term signal, Bain highlighted a new indicator based on nondisclosure agreement activity. 

Ontra, an AI workflow platform for private markets, has developed the first leading indicator for private equity deal activity from a proprietary NDA data set. The data revealed that there is a strong correlation between NDAs and deal closings roughly three months later.

The latest data revealed that deal activity will "remain essentially flat through July 2026, stable, but still far from a broad based recovery," the report noted.

Exit Markets Remain Slow

Exit markets also failed to regain momentum in the first quarter, Bain said, leaving the industry with limited progress on easing the liquidity squeeze that has weighed on the capital cycle. 

The firm tied the sluggishness to continued valuation uncertainty and market disruptions that have kept many sellers on the sidelines.

"Exits have been dragged down by the same market uncertainty that is plaguing investments. That's not to say the market isn't still clearing selectively. High-quality assets with strong strategic value continue to attract buyers, and a second tier of assets can still transact, but often only if sellers are willing to bend on valuations or pursue structured liquidity solutions like continuation vehicles," Bain & Company said.

The report also stated that fundraising will continue to be slow, noting that it takes 12 to 18 months of sustained improvement in exits and distributions to spur an uptick in new allocations.

"The bottom line in a market this challenging is that top-tier performance will continue to be rewarded. The uncertainty slowing down dealmaking will resolve eventually. But the opportunity right now is to determine where you can win and dig in to make it happen," the report concluded.

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