Summary
PE M&A markets are not going back to normal. GPs must transact in the face of volatility, not sidestep it.
- AI is all-pervasive. To get traction with bidders, GPs must prove that portfolio companies can defend against AI risk attack to capture the AI upside.
- Processes will have to be increasingly bespoke. Targeted, tighter positioning is essential, especially for “good but not exceptional” assets.
- GPs must give bidders opportunities to meet management ahead of a process and time to interrogate full data and diligence to build conviction.
- No bidder wants to be part of a large crowd.
- Deal deliverability and solid multiples today beat promises of peak valuations tomorrow.
- Trust, relationships and judgement matter more than ever to deliver optimum outcomes in uncertain markets.
The sell-off in software markets – dubbed the “SaaSpocalypse” – and Iran conflict shelved any lingering hopes that 2026 would, finally, be the year when PE deal markets returned to something resembling normal.
Pressure to sustain deployment and deliver distributions to LPs is intensifying. The best GPs recognise that success in today’s market requires proactive, innovative dealmaking.
Theme 1: Buying and selling companies in the AI era
No Information Memorandum will satisfy prospective buyers without a well-articulated defensive and offensive AI strategy. The most valuable businesses in today’s market can present robust data points and KPIs to evidence capabilities that AI cannot replicate, ranging from trusted relationships and firewalls shielding proprietary data, to regulatory expertise and physical delivery capability.
LDC exited its investment in Building Cost Information Service (BCIS), a construction pricing data and cost benchmarking platform, to Bowmark Capital[4].
On the surface, data analytics companies are vulnerable to AI disruption, but BCIS has built a huge proprietary data moat, built on many years of pricing data, secured behind a paywall.
Graphite Capital sold Beacon, a life sciences data and workflow platform, to Corten Capital. During Graphite’s ownership, Beacon integrated AI-assisted workflows into its offering, helping users to streamline the drug development process[5].
These transactions exemplify how sell-side AI narratives are moving beyond generic AI-driven operational efficiency discussions.
This will only become more important in a commercial environment where AI capability is powerful, but ultimately common.
Advisers must position the equity story to explain how a business uses AI in a way that sets it apart from its key competitors. Management teams and PE firms that fail to do this run a high risk of losing buyer conviction early in a process.
Our M&A Advisory teams work with GPs and management teams to land their AI narratives, and back them up with credible data and analysis.
The buyside AI checklist
Seven questions to ask when buying a portfolio company:
- What is the proof that a business is durable in the AI era?
- Is this a business that is already living on borrowed time because AI-powered competitors are already growing?
- Is it a high-stakes or high-trust business where non-AI businesses have an inbuilt advantage?
- Are physical assets essential for product/service delivery and can therefore help AI-proof the business?
- Does the business have intangible assets that are AI-proof (such as proprietary data not available for AI training)?
- If AI will take out costs, will it create a race to the bottom on pricing?
- If the entire sector starts using AI extensively, how will this business stand out in the market?
Download the AI resilience checklist
Discuss this theme with Kate
Kate Gribbon
Head of Financial Sponsor Coverage & Origination
Theme 2: Curating the deal process and the risk of being an ‘extra’
Buyers want to know that they have a real shot at a deal. Auctions where bidders are corralled into big processes to make up the numbers are not going to land.
It can take up to two years to identify and warm up the right buyers pre-process, and prepare comprehensive data covering all angles and articulating management’s story.
Thoughtful process curation rests on three pillars: a realistic EBITDA bridge, deliverability and management:
EBITDA bridge
Tepid GDP growth and a geopolitical quagmire are the harsh realities confronting bidders.
Over-garnished EBITDA stories are a red flag to selective bidders and damage credibility.
The delta between LTM EBITDA and the structuring EBITDA buyers are asked to bid off must be reasonable. If the add-ons to this EBITDA bridge are too ambitious, the narrative collapses.
Deliverability
A pragmatic assessment of the balance between certainty of outcome and maximum pricing should shape process design.
Deliverability is more important than grand promises of paying top dollar for an asset at an undefined point in the future. To this end, we see a full suite of diligence reports delivered alongside Information Memoranda in round one processes. This gives bidders a basis on which to build conviction and make substantiated offers that translate into real-life deal execution.
Management
Confidence in an equity story is rooted in the bidder’s relationship with the management team tasked with delivering the growth plan.
If access to management is restricted, buyers will simply prioritise other opportunities.
Overall, preparation and precise judgement are rewarded in this market. This has played out recently in LDC’s exit of its stake in Sedex Information Exchange, a supply chain risk management service, to Apax Partners6.
Discuss this theme with Kate
Kate Gribbon
Head of Financial Sponsor Coverage & Origination
Theme 3: Tough choices around valuations and distributions: why settling is strategic
The pressure to distribute capital to LPs is real, but waiting for certainty is not always prudent when it is impossible to forecast when markets will stabilise.
Potentially holding out for peak valuations and risking missed windows.
A solid multiple now for a prepared asset and primed buyer universe.
The distribution pressure point cannot be viewed in isolation. The exit decision also depends on the quality of the asset, the sector, the fund lifecycle, available capital, and the alternatives available.
The illiquidity of PE investments affords GPs a degree of flexibility to align asset sales with stable points in the cycle, but waiting for certainty is not always prudent, especially when it is impossible to forecast when (or if) markets will stabilise.
This shifts the exit parameters for managers. If a business is ready, and the buyer universe is primed, that is good enough. The valuation may not be 25x EBITDA, but a mid-teens multiple for a stable, high-quality, services-led business remains a very respectable outcome.
A business is ultimately worth what the market is willing to pay, so GPs should bring forward assets in the sectors where bidders are ready to pay up.
PE firms are built to price and understand risk relative to value, but the advent of AI risk in portfolio companies is a new form of disruption. We have yet to see second- and third-order impacts play out.
Still, the door is open for deals. Great assets continue to trade at good multiples and sectors insulated from AI risk, such as infrastructure services, are attracting keen buyer interest.
Dealmaking is difficult in the face of persistent volatility, but it is also necessary.
“Operating in this market requires a relationship-led approach to dealmaking.”
– Kate Gribbon, Head of Financial Sponsor Coverage & Origination
Preparing companies for sale must be grounded in good judgement and an understanding of what a GP is trying to achieve, rather than defaulting to a standardised process playbook.
Discuss this theme with Kate
Kate Gribbon
Head of Financial Sponsor Coverage & Origination
Value lies in identifying the right outcome — not just completing a deal.
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Sources:
1 https://go.preqin.com/webmail/909852/2060837670/7cdcd1e4d863f8ffbbda6db5c64f37c3c7500f7974e3f9de4829b22d42991d18
2 https://www.forbes.com/sites/donmuir/2026/02/04/300-billion-evaporated-the-saaspocalypse-has-begun/. See par 1
3 https://uk.finance.yahoo.com/news/stock-market-ftse-vulnerable-ai-disruption-060048098.html. See pars 1-5
4 https://www.ldc.co.uk/news/ldc-exits-bcis-following-four-year-transformation/
5 https://www.privateequitywire.co.uk/graphite-delivers-4x-return-on-sale-of-life-sciences-data-platform-beacon/. See par 1 and par 3
6 https://www.apax.com/news-views/apax-funds-make-strategic-investment-in-sedex/
7 https://www.privateequitywire.co.uk/tinicum-and-blackstone-to-acquire-uks-senior-in-1-4bn-deal/
8 https://pitchbook.com/news/articles/european-pe-refocuses-on-tangible-assets-amid-ai-uncertainty. See par 4
9 https://www.towerbrook.com/towerbrook-announces-strategic-investment-in-the-irish-infrastructure-services-provider-and-engineering-firm-gmc-group/
10 https://verdane.com/verdane-partners-with-ashcourt-group-to-broaden-access-to-sustainable-construction-materials/
11 https://ionanalytics.com/insights/mergermarket/omers-hires-dc-advisory-for-network-plus-sale/. See par 1
12 https://www.nordiccapital.com/news-views/press-releases/tradinghub-secures-strategic-investment-from-nordic-capital-to-accelerate-next-phase-of-growth/
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