Software buyout deals fall to lowest level since pandemic as AI fears freeze dealmaking

Software buyout deal value collapsed to $50 billion in the first five months of 2026, according to PitchBook data reported by the Financial Times. That’s down from $88 billion during the same period in 2025, a drop of roughly 43%. It also marks the lowest level of software buyout activity since the COVID-19 pandemic ground markets to a halt.

From record highs to near-record lows

Just last year, software buyout volumes hit $290 billion for the full year, an 11-year high. Now, 2026 is on pace to be the weakest year for software buyouts since 2018.

Both US and European software private equity exit activity has fallen sharply as a share of total market activity.

AI broke the valuation model

Industry executives have described the current environment as one of “paralysis.”

For years, the value proposition of enterprise software was straightforward. Companies built tools that automated specific workflows, locked in customers with long-term contracts, and generated predictable, recurring revenue. AI threatens to upend that entire dynamic.

What this means for investors

Private equity firms that acquired software companies in 2021 and 2022 at peak valuations are now sitting on assets they can’t sell at acceptable prices. With both deal activity and exit activity declining, these firms face longer hold periods and potentially lower returns than their investors were promised.

When PE firms stop buying software companies, it removes a significant source of demand from the M&A market.

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