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The value of buyouts by private equity groups fell by more than a third in the first quarter of the year, with dealmakers warning that fears over AI’s impact on software businesses and war in the Middle East risk fuelling a further decline.
Private equity groups agreed acquisitions worth $172bn in the three months to March, a 36 per cent fall from the previous quarter, according to Dealogic. The figure was an 8 per cent drop from the same period last year.
Several buyout executives and advisers said some firms were now holding off on signing any deals because of market turmoil sparked by the Gulf conflict, which began at the end of February.
Rising concerns about the effect of AI on software groups — one of the buyout industry’s most lucrative sectors in recent years — have also punctured hopes that private equity was turning a corner after a prolonged downturn.
“We’re in one of the most turbulent periods I can remember,” said the head of a large European buyout group. “Things are grinding down quite quickly now in terms of activity.”
The executive said the worst of the economic impact from the war was yet to come.
But the potential disruption to software groups’ business models from AI could have an even greater impact on dealmaking in the coming months. Fund investors were “completely risk off” on software, the person added.
An executive at a large US buyout group said: “We’re starting to see more clearsightedly the tsunami about [to] hit businesses, which is the impact of agentic AI . . . Plenty of people are saying we’re not going to be investing until we figure this out.”
The large quarter-on-quarter drop in the value of buyout deals follows a recovery in the second half of last year. Global deal value jumped to over $900bn in 2025, driven by a handful of megadeals such as the $55bn take-private of video games maker Electronic Arts by a Saudi-backed consortium assembled by Jared Kushner and Silver Lake.
“In January and February we saw the market recalibrating after two years of volatility,” said Charles Hayes, co-head of private capital at law firm Freshfields, adding that people had been “very positive about this year”.
“Now you’ve got the Middle East crisis, that has given some pause for thought,” he said, adding that some firms had halted exit processes and new investments for now. “The question is: how long will the conflict continue? But this remains a market with enormous latent capacity.”
The $172bn of buyouts signed in the first quarter of 2026 was still higher than the totals for the equivalent quarters in 2023 and 2024.
Meanwhile, the value of global private equity exits in the first three months of 2026 fell to $162bn, a decline of one-third from the previous quarter, returning the same level as the same period last year.
The buyout sector has struggled since 2022, with firms having bought swaths of companies during the previous decade of low interest rates that they have since been unable to sell in the face of higher borrowing costs and geopolitical ructions.
Private equity funds raised $86bn globally in the first three months of 2026, just less than the same quarter last year, according to PitchBook, whose data shows that 2025 was the industry’s weakest year for fundraising since 2018.
