Private capital entered 2026 expecting a more active dealmaking environment. Instead, macroeconomic uncertainty, shifting interest-rate expectations, inflation concerns, and geopolitical disruption have kept the market volatile. Deal volumes remain uneven, exits are constrained, and fundraising continues to favour the largest, most diversified platforms.
- A more selective market. Larger sponsors and principal investors with capital, strong distributed to paid-in capital (DPI), credible value creation plans, and the ability to act through uncertainty are still transacting. Others face longer fundraises, ageing portfolios, and more pressure to return capital to limited partners.
- Resilience becomes the new edge. In this environment, resilience is not just about absorbing shocks. It’s about building the capabilities to keep deploying capital, create liquidity, use data as a competitive advantage, and reposition portfolios while others pause.
- AI moves from theme to capability. Private capital investors are investing in AI both as a major deployment theme and as a way to strengthen their own operating capabilities. They are investing capital in AI infrastructure, energy, compute, and enabling technologies. At the same time, leading firms are forging partnerships with OpenAI, Anthropic, Google, and other AI leaders to bring new tools, data, and execution capabilities across their platforms and portfolio companies.
In this mid-year M&A update, we take a closer look at how the most resilient private capital players are using volatility to their advantage: building AI and data capabilities, investing in infrastructure, navigating tighter exit markets, managing the first major test for private credit, and strengthening the operating infrastructure needed to scale across more complex private capital platforms.
‘Private equity and principal investors are putting themselves at the centre of the action as AI transforms the global economy. That can make for a bumpy ride, but we are seeing the most resilient players taking bold steps with data and technology to gain a competitive advantage in these volatile times.’
Eric Janson,Global Private Equity and Principal Investors Leader, PwC USResilience is becoming a dealmaking capability
For private capital, resilience is the new edge
When the cost of capital was low and exit markets were active, private capital investors could rely more heavily on financial engineering, capital structure optimisation, and multiple expansion. That environment has shifted. Fundraising is under pressure, exit windows have become more selective, holding periods have lengthened, and financing costs remain elevated. In this market, dealmaking advantage increasingly depends on capability: the ability to raise capital, find conviction-led opportunities, underwrite risk differently, and create value that buyers and limited partners (LPs) can see.
The first capability is existential: the ability to keep raising, deploying, and compounding capital through the cycle. For dealmakers, that means having the flexibility to pursue buyouts, growth investments, private credit, infrastructure, and real assets as conditions change. It also means showing LPs realised returns and credible value creation plans.
Building platforms, not just portfolios
Sponsors are building the operating capabilities needed to make dealmaking more repeatable. That includes sector platforms, specialist talent, stronger governance, and better use of data across funds and portfolio companies.
M&A is part of this capability build. In May 2026, KKR completed its acquisition of Arctos Partners, a sports investing and general-partner (GP) solutions platform, in a transaction valued at $1.4bn in initial consideration. The deal gives KKR a differentiated entry point into professional-sports franchise stakes, adds a scaled GP solutions platform, and strengthens its capabilities in secondaries, sourcing, and origination. It also shows how large sponsors are using acquisitions to build specialised platforms and expand long-duration capital, not just add scale.
The same capability logic is now extending into technology and data. For large private capital platforms, these are becoming sources of dealmaking advantage: helping firms originate opportunities, move faster in diligence, manage portfolios at scale, and create value. Larger private equity firms can leverage data from across their portfolios, giving them an edge over smaller players.
AI is rewriting the private capital playbook
The pace of AI partnerships has accelerated in 2026 as sponsors look for faster ways to bring AI into internal investment processes and portfolio operations. In May 2026, OpenAI announced the launch of the OpenAI Deployment Company, with $4bn in funding from TPG, SoftBank Group, Brookfield, Bain Capital, and others. The same month, Anthropic announced a $1.5bn joint venture with Blackstone, Hellman & Friedman, and Goldman Sachs to create an AI-native enterprise services company focused on deploying Claude into enterprise operations. Together, these deals show how private capital is partnering with frontier AI leaders to turn AI from a thematic investment into a practical value creation capability across enterprise functions, operating efficiency, and growth.
AI is also changing how sponsors assess new investments and manage existing portfolios. Diligence now needs to test how exposed a target may be to AI disruption, whether it has the data and technology foundations to adopt AI effectively, and how management plans to use AI to improve productivity, margins, and growth. For sponsors, that makes AI capability part of the investment thesis, the value creation plan, and the path to exit.
The AI opportunity is not limited to software or internal tools. It is also shaping where private capital is being deployed, particularly across compute, energy, and digital infrastructure, a theme we discuss later in this outlook.
Private equity deal volumes and values in 2026
Private equity dealmaking remains uneven in early 2026. Available data shows deal volume was broadly flat year over year, with 5,174 deals in the first quarter of 2026 compared with 5,176 in the first quarter of 2025. But deal value fell 14% year over year to $482bn and activity slowed meaningfully from the end of 2025, when fourth-quarter deal value reached $627bn across 5,529 deals. That points to a more selective market, with sponsors still transacting but deploying capital with greater caution as macroeconomic uncertainty, financing conditions, and exit constraints weigh on confidence.
AI-related uncertainty is weighing on dealmaking in some sectors. For example, sponsors have become more cautious about software targets as they assess how AI may affect revenue models, margins, and long-term competitiveness. Similar questions are emerging in other service-led sectors where AI could change delivery models or reduce the value of existing capabilities.
The exit environment remains one of the main constraints on private equity dealmaking. As of March 2026, according to PitchBook data, private equity globally had 32,979 portfolio companies on the books, little changed from 32,776 at the end of 2025. But 34% of portfolio companies had been held for more than five years, up from 28% in 2025. That ageing portfolio base is increasing the pressure on sponsors to return capital to LPs and explore all viable exit options.
Potential listings by exceptional AI-related companies could improve IPO sentiment in the second half of 2026, but on their own, they are unlikely to reopen public exits for the broader private equity portfolio universe. Until the IPO market broadens, corporate sales, sponsor-to-sponsor deals, secondaries, and continuation vehicles will remain critical release valves.
Regional activity diverges. Private equity activity has varied by region.
North America: Large take-privates continue to show sponsor appetite for scaled assets with defensive demand and value creation potential. Blackstone and TPG’s acquisition of Hologic, valued at $18.3bn, is one of the largest examples so far in 2026 and shows continued interest in healthcare platforms.
Europe: Active large-scale dealmaking has occurred in 2026. Advent International and FedEx agreed to buy Polish parcel locker operator InPost for about $9.3bn, while Blackstone and EQT agreed to acquire Urbaser, a Spanish waste management and environmental services company, for $6.6bn. Both acquisitions point to continued demand for infrastructure-like assets with visible cash flows.
Asia Pacific: Activity in the region has been more selective, but long-term growth themes remain attractive. In India, private capital has focused on infrastructure, healthcare, and consumer platforms linked to the expanding middle class. Blackstone’s investment in Neysa highlights India’s AI cloud and GPU infrastructure buildout, while its proposed $1.8bn acquisition of Royal Challengers Bengaluru as part of a consortium points to the institutionalisation of Indian sports, media, and IP assets as scalable consumer platforms.
In Japan, corporate governance reform and portfolio reviews continue to create opportunities for sponsor-led take-privates. EQT’s proposed $3.8bn take-private of Kakaku.com, a Japanese classified and marketplace platform, and KKR’s proposed $3.3bn take-private of Taiyo Holdings, a leading global manufacturer of electronic materials, point to Japan’s growing role as a market for conviction-led control investments, including in digital platforms, consumer data ecosystems, and the physical supply chains that enable AI and advanced computing.
Middle East: Principal investors are continuing to shape global capital flows. Regional conflict and eventual reconstruction needs have raised questions about possible shifts to regional investment priorities, but recent activity suggests that major sovereign and sovereign-backed investors remain active globally. One example is the planned acquisition of a global data centre platform by a consortium of private capital, sovereign-backed and technology investors. Announced in October 2025 and expected to close in the first half of 2026, the transaction is the largest data centre acquisition in history and reflects the region’s growing role in AI infrastructure and digital capacity.
The infrastructure boom continues—and not only for AI
Infrastructure remains one of the core growth areas for private capital, attracting funds and large-scale investment. In 2026, sponsors have continued to focus on utilities, energy, and digital infrastructure as demand accelerates from AI, electrification, and industrial growth. Global Infrastructure Partners and EQT’s proposed $33.4bn acquisition of AES shows private capital’s growing role in scaling power infrastructure and renewables platforms. The Urbaser deal noted above is another example of demand for infrastructure-like assets with visible cash flows.
Data centres have drawn much of the attention, but the opportunity extends into AI compute, energy, and other enabling infrastructure. PwC’s Global Infrastructure Outlook 2025–50 suggests that data centre spending may peak in the next year or so at about $250bn, before falling back to about $100bn annually by 2030. As AI workloads grow, individual data centres will be only one part of the opportunity. Investors will need platforms that can coordinate land, power, connectivity, capital, customer demand, and operating expertise at scale.
Recent transactions show how that opportunity is expanding. Blackstone announced plans to invest more than $25bn in Pennsylvania’s digital and energy infrastructure. Apollo led a $3.5bn capital solution supporting Valor’s $5.4bn xAI compute infrastructure transaction. DigitalBridge agreed to acquire ArcLight in a transaction valued at up to $1.05bn, highlighting the convergence of digital infrastructure and power. The Blackstone-Google AI cloud venture also shows how private capital is moving beyond AI applications into the compute capacity and enabling infrastructure needed to support the AI ecosystem at scale.
At a time when some private equity firms are pulling back from software-as-a-service deals, we expect this shift to asset-heavy sectors with tangible cash flows and inflation-linked returns to continue.
Infrastructure is not only an AI story
PwC’s Global Infrastructure Outlook projects that global infrastructure investment across all sectors will rise by almost 60% over the next 25 years, from about $4.4tn per year today to just over $7tn in 2050. Asia Pacific is expected to account for more than half of that spending, while the Middle East and Africa are expected to see the largest increases. In the US and Europe, investment needs are being shaped by power demand, transport, social infrastructure, and the energy transition.
For private capital, the opportunity is significant: public budgets are under pressure, and private equity, pension funds, sovereign wealth funds, and family offices will have a larger role to play in funding the next generation of infrastructure.
Private credit faces its first test as a major asset class
Private credit has grown rapidly from a niche alternative-lending market into a mainstream source of capital. Assets under management now exceed $2.2tn and are expected to reach $4.5tn by 2030, according to Preqin. That growth has made private credit an increasingly important source of financing for deals, particularly as traditional lenders have pulled back from parts of the leveraged finance market.
But rapid growth also brings scrutiny. Recent borrower defaults, credit losses, and concerns about private credit’s exposure to sectors such as software have led to negative headlines. So, too, have questions about illiquidity, valuation discipline, and the relative lack of transparency in parts of the market. Some private credit vehicles, particularly those with exposure to retail or wealth channels, have faced increased redemption requests and moved to limit withdrawals. Regulators are paying closer attention. In the UK, US, and Europe, authorities are seeking to better understand the risks that may lie within private credit and other parts of the financial system.
PwC’s private credit survey of more than 120 credit portfolio managers globally suggests that market participants are taking a nuanced approach. Despite concerns about defaults and restructurings, more than 80% of respondents expect to receive increased allocations to private credit over the next 12 months. While they anticipate that borrower defaults and credit losses will affect performance in 2026 just 16% said they were concerned or very concerned about an increase in private-credit-related defaults and restructurings over the next one to two years.
The current cycle is likely to widen the gap between stronger and weaker private credit funds. As with any fast-growing asset class, some lenders will have stretched too far, moved too quickly, or applied insufficient rigour to underwriting new loans. Stronger managers will be better positioned by focusing on sharper credit selection, stronger portfolio monitoring, better governance, and more robust downside protection.
Private credit is not in crisis. But it is facing its first major test. The results will help define who leads the next stage of its growth story.
Outlook for private credit in the second half of 2026 and beyond
The remainder of 2026 is likely to see continued macroeconomic and geopolitical uncertainty, keeping pressure on confidence, financing conditions, and exit timing. But private equity and principal investors are not standing still. The most resilient players are building capabilities, strengthening portfolios, and positioning themselves around long-term themes such as AI, infrastructure, and private credit.
A few areas are worth watching closely:
Fundraising: managers with strong DPI and credible value creation plans will have an advantage as LPs put greater weight on realised returns over unrealised measures such as internal rate of return. Others may face longer fundraises, lower targets, or, in some cases, questions about their long-term viability.
Secondaries: secondaries and continuation vehicles are becoming an important release valve for liquidity. They can help sponsors hold quality assets longer, but they also raise questions around valuation, transparency, conflicts of interest, and whether investments can ultimately be fully exited to third parties.
Fund operations: as private capital platforms expand across asset classes, geographies, and investor channels, fund operations are becoming more complex and costly. Technology, AI, and managed services can help firms reduce manual processes, improve scalability, and protect margins.
NAV lending: net asset value (NAV) loans can give sponsors flexibility when exits are delayed, but they also add complexity and potential portfolio-level risk. Investors will be watching how these tools are used and disclosed.
Retail access: efforts to broaden individual investor access to private markets are gaining momentum, from US 401(k) proposals to European Long-Term Investment Funds, UK Long-Term Asset Funds, and private wealth channels in selected markets. The opportunity is significant, but so are the questions around suitability, liquidity, valuation, and transparency.
Resilience will matter whichever way the market moves. If exits and fundraising improve, firms with capital and conviction will be ready to act. If conditions remain tight, the gap between stronger and weaker platforms is likely to widen.