This article is part of the “Perspectives in Private Equity” series.
While technology remained a popular target industry for private equity investors in 2025, nervousness around valuations meant dealflow in certain parts of the market was slower than expected. Tech M&A rebounded globally, with deal value up more than 75% year-on-year to nearly $480 billion by mid-December. Almost half of the larger deals recorded by Bain & Company involved AI-native companies or cited AI benefits.
European transactional activity was more subdued than that seen in the U.S., where large commercial collaborations around AI hit the headlines. Apple and Google announced a multi-year deal in January 2026, for example, that will see Apple use Google’s Gemini AI models to power some of its key technology.
The rapid expansion of AI adoption continues to attract both attention and capital, with private equity working hard to identify the best ways to deploy funds. There is no doubt that AI is here to stay and that it will transform businesses, but the fact that it will also threaten business models, plus the level of capital expenditure being earmarked for development by the large tech companies, makes pricing a challenge on deals.
For now, we continue to witness a lot more venture capital activity around pure AI plays and emerging platforms, while private equity focuses on architecture, infrastructure and add-on acquisitions that will bolster existing portfolio companies.
Some of the biggest players are focusing their investment theses around digital infrastructure, at the intersection of AI and power, where the new U.S. administration has made clear its priority to accelerate data center developments. With the clear messaging that tech companies building large, energy-intensive data centers must source and fund their own energy infrastructure, investment opportunities abound that look far less risky to private equity than the alternative venture space.
Some of the other areas where we see investors increasingly exploring opportunities include cybersecurity, a topic that sits on every board member’s to-do list and at the intersection of regulatory and corporate expansion. Competition for cyber deals has been fierce for some time and that looks unlikely to cool. Likewise, industrial tech is another sector attracting growing attention, with fintech also remaining a real focus for private equity sponsors.
One segment that may see a swing in the nature of transactions is software-as-a-service (SaaS), long a hotbed of private equity activity. SaaS offerings are adapting to accommodate and / or compete with AI and are increasingly facing questions over their long-term future given advances in agentic AI that will allow more companies to develop their own software capabilities in-house.
Outlook for 2026
As we move through the coming year, trends are directionally positive for private equity and as such we anticipate more technology and AI-driven deals. Activity started to pick up in the U.S. through 2025 and we expect that to gather momentum and be followed by more European deals, particularly as Europe plays catch up with the levels of investment already made in the U.S. There were signs of renewed optimism in Europe in late 2025, with OpenAI launching Stargate UK, a partnership with NVIDIA and NScale that will build AI infrastructure in the UK, and KKR investing $1.5 billion into European data center platform, Global Technical Realty.
With the capital markets likely to strengthen, we can look forward to more take-privates in the next 12 months, as well as more collaborations, joint ventures and licensing transactions. Licensing has been a growing theme of late as companies have sought to circumnavigate regulatory, valuation and other M&A hurdles by licensing software instead of transacting, with the chip supply segment particularly active.
On the regulatory side, the new U.S. administration continues to pursue a light-touch approach to AI oversight that diverges from the EU, with its contrary heavier regulated AI Act. At time of writing, it appears that full implementation of the AI Act, due in August 2026, will be delayed, perhaps as part of a rethink to ensure European businesses can remain competitive.
The UK’s approach – with no all-encompassing AI legislation like the EU – is aligning more closely with the U.S. approach of promoting innovation over regulation. We think, therefore, it is unlikely that we will see any major regulatory developments relating to AI on either side of the Atlantic in the near future.
With interest rates trending down, exit markets unlocking and ample dry powder ripe for utilization, private equity’s appetite for tech and AI deals will only intensify going forward and we should expect more mega deals on the horizon.
