The current state of the tech buyout market can be summarized as stagnant, with activity virtually halted. Recent reports indicate that global tech buyouts only reached a total value of $9.3 billion over April and May 2026. This is a shocking deviation from previous years when the market routinely saw multi-billion-dollar transactions each month.
What has caused this freeze in buyouts? The rise of artificial intelligence has disrupted traditional valuation methods. Buyers are now compelled to differentiate retention and revenue streams based on whether the products are designed for AI or are vulnerable to its impact. Major consulting firms have warned that AI's influence on pricing models means companies must reevaluate their metrics for measuring retention and revenue between AI-enhanced products and older, legacy versions.
Consequently, dealmakers find themselves in a standstill, unable to reach consensus on potential future cash flows. The core uncertainty revolves around whether certain products will remain relevant in the coming years. Sellers are seeking to maintain their asking prices based on current performance while buyers are hesitant, hoping for discounts due to perceived risks of obsolescence.
How are private equity firms responding to this challenging landscape? Many are shifting focus from traditional mid-market software deals to AI infrastructure investments. This includes acquiring physical assets like data centers and computing resources that support AI development. Strategic buyers are also turning to minority stakes in startups instead of complete buyouts as a way to mitigate risk while gaining exposure to this evolving market.
The implications of this shift could be significant for the broader market. A lack of activity in buyouts generally results in fewer exit opportunities for venture-backed software companies. There is a growing expectation that private equity will become the primary exit strategy for software companies particularly susceptible to disruption from AI. According to StepStone’s 2025 research, private equity exits that have been realized were sold at a premium compared to previous quarter valuations. This indicates that, even in this challenging environment, successful transactions are conducted with careful valuation strategies rather than through hasty decisions.