Catenaa, Saturday, October 10, 2026- Global private equity deal count fell to their lowest level since the third quarter of 2021 in Q2 2026 as buyer and seller expectations widen.
According to Nils Rode, Chief Investment Officer at Schroders Capital, private equity activity continued to recover in the second quarter, in a market where selectivity matters more than broad momentum.
Rode said that despite private equity fundraising increased in Q2, led by buyouts, final close numbers were broadly flat.
“Deal value remained elevated but concentrated in a handful of AI-related mega-rounds, and deal count fell to its lowest level since Q3 2021,” he said.
Rode highlighted that liquidity remained constrained in Q2, while exit values, excluding SpaceX’s primary-share IPO, normalized after the first-quarter surge in large transactions, and exit count fell in line with new deals to its lowest level since Q3 2021.
He noted that public listings improved, particularly for high-quality technology and AI businesses, but sponsor-to-sponsor secondary buyout activity softened.
“A broader recovery in fundraising and deal activity will depend on sustained improvement in distributions to restore LPs’ re-up capacity, which in turn requires narrowing the gap between buyer and seller expectations,” Rode said in a note to clients.
Rode identified smaller buyout transactions, particularly those involving companies valued below $1 billion, as an attractive investment segment. He said the concentration of investor capital in larger deals has created opportunities in the smaller end of the market.
According to him, the valuation gap remains significant. In the second quarter, average entry multiples for small and mid-sized buyouts stood at 11.0x EBITDA, compared with 14.0x for large buyouts – a 3.0x discount. The valuation discount to comparable small-cap public equities was even wider, at around 11.0x.
According to Rode, investors are becoming less able to rely on rising valuation multiples to generate returns. He argued that lower acquisition prices and opportunities to improve business operations could support performance in smaller buyouts.
They also tend to be more domestically focused and less exposed to geopolitical disruption and trade volatility, an important source of resilience in the current environment.
Additionally, Schroders Capital expects small and mid-sized buyouts typically use less debt than large buyouts, reducing sensitivity to rising interest rates and refinancing risk.
“This is particularly relevant as the supply shock from the prolonged war in the Middle East, debt-financed AI capex, and expansionary US fiscal policy increase inflation and rate pressures, Rode said. “Financing remains available for high-quality assets, although lenders are becoming more discriminating.”
