For a few years, software had two things that private equity firms coveted: brisk growth and inert customers who tended to sign up and stay put. Buyout firms piled in. But the so-called SaaSpocalypse — which reached fever pitch last week as investors offloaded shares in companies that sell software as a service — has called the wisdom of that trade into question.
Despite its historical penchant for bricks and mortar, private equity — and indeed the private capital sector more broadly — embraced the software sector with alacrity. Between 2020 and the first half of 2025, roughly a fifth of all buyouts in North America were tech deals, according to Bain & Co. US-listed private credit funds known as business development companies have a similar exposure to software-related debt, PitchBook estimates.
For some companies, the sell-off in recent weeks reflects nebulous fears of AI disruption rather than actual present-day profitability problems. Shares in customer-relations giant ServiceNow have fallen almost one-third this year, despite it producing better fourth-quarter results than it had previously predicted. Project management software maker Monday.com’s shares fell more than 20 per cent on Monday when the group issued its 2026 guidance, despite it forecasting 18 to 19 per cent revenue growth.
It’s fair to say, though, that markdowns are coming for many private equity portfolio companies. The S&P North American technology software index’s enterprise value as a multiple of forward ebitda has fallen more than 30 per cent since 2021. It would take average annual ebitda growth of almost 15 per cent for a company to outrun that slide and keep its valuation static. And for those that haven’t grown, leverage will make the impact on their equity more pronounced.
Even if software companies are still able to service their debts, this creates a problem for investors hoping to refinance borrowings or sell companies back to public markets. Visma’s owner, the buyout group Hg, is considering delaying the software group’s €19bn offering, the largest expected in London this year. Anyone hoping for a profitable, speedy exit in the near future is probably out of luck.
Meanwhile, PitchBook LCD calculates that software accounts for about 15 per cent of debt maturing in the leveraged loan market in the US between 2027 and 2028. About $25bn of debt is trading at distressed levels. Even for those who have not been directly caught up in the maelstrom, new borrowings are likely to be more expensive than the old. Those who can afford to be patient have an edge.
The sell-off may indeed have been too indiscriminate. Companies that sell customised software to a single sector, for instance, may be harder to displace than those peddling a product across the board. Apollo Global Management boss Marc Rowan said his firm would emerge looking “prettier” as a result of its earlier decision to avoid big software investments. For the others, it is going to be a question of “how ugly”?
Letter in response to this column:
Private credit can ride out the tech storm / From Nick Baldwin, Managing Director, Valuations & Opinions, Lincoln International, London WC2, UK
