PE market squeeze signals
- Recent private‑equity deals are trending toward higher equity cushions and lower leverage in purchase structures. - Equity share rose to about 49%, while Q1 PE fundraising fell to $86 billion despite roughly $2 trillion in dry powder. - Deployment reached $481.6 billion in Q1 amid compressed software multiples, indicating a persistent buyer–seller valuation gap ( ).
Private equity buyers are putting in more of their own cash and borrowing less to close deals, a sign that debt is still expensive enough to reshape buyout math. (pitchbook.com) In the broadly syndicated loan market, sponsor equity checks were hovering near 50% by the third quarter of 2024, after topping 50% for the first time on record in 2023, according to LCD data published by PitchBook. Average debt leverage on large-corporate leveraged buyouts fell to 4.8 times EBITDA in 2023, the lowest level in 13 years. (pitchbook.com) The pressure point is interest cost. PitchBook said average yields on loans backing large-corporate buyouts reached nearly 11% in 2023, and interest coverage on new leveraged buyouts fell to 2.4 times, then hovered around 2.3 times in 2024, leaving less room for buyers to pile on debt. (pitchbook.com; pitchbook.com) Dealmaking has not stopped. PitchBook counted more than 5,100 private-equity transactions worth $481.6 billion globally in the first quarter of 2026, with another 975 exits worth $306.7 billion. (pitchbook.com) Raising fresh money is still harder than spending old money. Foley, citing PitchBook data, said private-equity fundraising totaled $86 billion in the first quarter of 2026 even as firms still held about $2 trillion of dry powder, or committed capital that has not yet been invested. (foley.com) That mismatch traces back to exits. S&P Global Market Intelligence, using Preqin data, said global private-equity dry powder stood at $2.184 trillion as of March 31, 2025, while slower sales and initial public offerings kept cash from flowing back to limited partners for new commitments. (spglobal.com) Software sits near the center of the squeeze. PitchBook said software accounted for about 18% of U.S. private-equity deal value in 2025, while public software multiples were down by more than one standard deviation from their eight-year average in its February 17, 2026 analyst note. (pitchbook.com) Bain said the 2025 rebound in private equity was concentrated in megadeals, while fundraising lagged and liquidity problems persisted across the industry. That leaves a market where sellers still remember 2021 prices, but buyers are underwriting with higher financing costs and lower public-market comps. (bain.com) PitchBook said 11,000 portfolio companies had been held for more than five years as of early 2026, a backlog that could push more sponsors to sell even at lower leverage and fatter equity checks. Until those exits clear, private equity looks active on paper and tighter underneath. (foley.com)
