A VC in Vacationland

We just attended the webinar with Hugh MacArthur, Chairman of our Global Private Equity practice–always very informative.

Here are a few highlights, focused on the buyout sector:

• Seller expectations on buyout valuations not diminished—still high and will remain that way through 2026
• 2026 will look a lot like 2025—same # of transactions; high valuations
• Unlikely  to get back to a buyers market any time soon
• Average 7 year holding periods at present
• GPs—expect more exits, but at what price?
• Fundraising remains challenging
• Buyout capital raised in 2025 down 16% from 2024
• 2.5X GP demand for new capital versus what LPs offered (worst in a decade)
• 39% of PE buyout funds failed to raise in 2025
• 90% of buyout fund portfolios are SAAS software on a value basis
• Diversity comparison—S&P 500 is 15% software; 60% hardware; (it is likely better to sell the picks & shovels to the gold miners than to mine gold) 
• Buyout loan interest rates remain in the 8-9% interest rate range
• Achieving 20% IRR targets required 5 annual EBIDTA growth in 2016; today 12% annual growth is required; extremely difficult to meet, especially with lower valuation expansion due to AI
• PS buyout firms  need to focus on full potential (Bain-speak) DD for risks—commercial, operational, technology, sustainability, AI and digital
• Buyout firms need a well thought-out 5 year plan for each acquisition (Bain-speak again)
• Average fees continue down as firm scale (AUM) grows—1.8% 2016 to 1.6% 2026
• LPs—looking at two key factors prior to GP investing: long term track record and a repeatable model for generating alpha (what the engine that drive value growth?)
• Key Bain challenge for GPs—get back to a 5 year holding period with 5% EBITDA growth (old school model) via margin expansion not valuation growth
• AI will hammer buyout firm software portfolios values; SAAS firms must become the leaders in the transition; move from per seat to value pricing also critical.

Abstracting from the Bain consulting pitch around fundraising challenges and portfolio value creation, the webinar only forecast a slight improvement in the buyout space for 2026. The in-webinar polls were in general agreement, with only a slight increase in exits for 2026.