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PE Pulse: key takeaways from Q3 2026 · NextWave Private Equity

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  The Global PE Pulse Podcast from EY
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  Hi everyone, and thanks for joining the latest edition of the PE Pulse podcast.
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  I'm Pete Witte. I'm the Insights Leader for Private Equity at EY.
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  And over the next few minutes, we'll walk through all the latest goings
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  on in PE and some of the stuff that we're seeing with respect to deals,
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  last quarter's themes and areas of focus.
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  And we'll close out with our outlook for the next few months.
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  Thanks again for joining and let's get right into it.
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  This quarter's deals environment, acquisitions,
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  exits and financing.
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  And let's start big picture.
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  You know, one of the interesting dynamics from the first part of this
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  year was that corporate activity had been really strong while private equity
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  activity had been a little bit softer.
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  Typically, buy-side PE deals make up about,
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  call it 18, 20% of the overall M&A market.
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  But in Q2, for example, that had shrunk down to about 10%
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  because corporate activity was really strong and PE activity was a little bit
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  softer. But now we're seeing a reversal in those trends.
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  Whereas we saw a little more softness in Q3 on the corporate side and more
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  strength on the PE side.
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  Now, overall, M&A activity was down about 25,
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  30% by value in Q3 versus Q2.
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  And that makes it one of the softer quarters that we've seen over the last
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  year and a half or so.
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  Now, that said, we still saw over $1 trillion worth of deals announced last
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  quarter. That's still well above the long term average,
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  but still just a bit of a pause relative to some of the strength that we've seen
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  for the last year or so.
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  Now, on the PE side, it's been very different.
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  You know, the market was sort of stuck like quicksand for the first half of the
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  year. And now we're seeing momentum start to build again.
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  So in Q3, for example, acquisitions were up 40% by value from
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  Q2. Now we're still down about 13% this year to date versus last year.
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  But what's interesting is when you start to look at what's really driving that.
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  Last year, we had 11 deals that were above the $10 billion mark -
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  11 huge deals. So far this year, we've only had four.
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  And so while the value of those big mega deals is down 50% year over year,
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  the value of everything else, large deals,
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  upper middle market, middle market, that's all up 4%.
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  All of which to say is that I think there's some resiliency underneath the
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  surface here when you start to peel away those layers.
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  And we just recognize that some of those really large scale transactions,
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  especially large scale tech transactions,
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  just aren't happening to the same degree that we've seen in prior years.
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  And some of our latest survey results, I think,
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  just sort of validate some of those dynamics.
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  So we asked folks, for example, over the last year,
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  what kind of things have you done in response to AI related disruption risk?
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  46%, almost half say that they've expanded their diligence.
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  Probably not surprising, but 40% said that they had walked away
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  from a potential investment.
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  Another third said that they had renegotiated a purchase price or reduced
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  a proposed valuation.
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  About a fifth said that they had changed up transaction structures.
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  Right. So those are the kinds of impacts that we're seeing in these numbers.
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  And so remember when I said in a typical quarter PE is more like 20% of M&A.
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  And in Q2 it had shrunk to 10%.
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  Well now we're back to those more normal levels again,
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  20% in Q3. So way more in line with what we normally see in terms of the balance
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  between corporate and sponsor backed activity.
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  Last thing I'll mention with respect to deals, you know, there's this view out
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  there that sometimes elections can change the timing of deals.
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  Obviously in the US we had the midterms that are occurring.
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  And specifically what you'll see sometimes is a little bit of a pull
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  forward or acceleration and activity as folks look to get out in front of the
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  elections and just take advantage of some of that remaining regulatory
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  certainty while it still exists.
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  I don't think we've necessarily seen a ton of that in this cycle,
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  which is constructive, because it means there's no hangover
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  from that after the elections.
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  And the momentum that we're seeing now has the potential to continue to build.
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  This quarter's key market themes and fund priorities.
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  And we'll talk about a couple of things,
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  exits and AI, because that's what everybody's really focused on right now.
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  Now when we look at exits, we're continuing to see some progress
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  there. We saw about $212 billion worth of exits last quarter.
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  That was up 15% from the prior quarter.
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  And what that means is that over the last 12 months,
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  exit activity is up 25% versus the prior 12 months.
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  And so for the first time in a long time,
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  we have more money coming out of private equity than we have going in.
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  Realizations, running about $30 billion ahead of deployment,
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  which is indicative, I think, of just a healthier balance
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  between putting LP capital to work and getting those proceeds back to
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  investors. And that's a really welcome development.
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  So a couple years ago, for example, as part of our survey,
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  we asked GPs to rank the pressure they were getting from LPs around
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  distributions on a scale of 1 to 10 from no pressure at all to we've never seen
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  pressure like this in our entire lives.
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  Two years ago they said it was a 5.6.
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  Last year they said it was a 6.3.
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  That's about where it is right now. But what's more interesting is the level of
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  intensity at the top end of that.
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  Right now, 35% of GPs rate the pressure that they're getting at an eight or
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  higher. Two years ago, that was just 6%.
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  Now corporates have been big buyers of PE backed assets.
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  And as we head into Q4, one of the things folks are going to be
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  watching for isn't necessarily the sponsor backed activity,
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  but the appetite from corporate boards to go out and do deals.
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  Now, let's talk briefly about AI, because while we're still seeing a lot
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  of uncertainty around AI led disruption and what that means from a deployment
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  perspective, it continues to be a really strong area of focus within the
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  portfolio. In our survey, 80% of GPs say that AI related spending
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  across the PortCos has increased over the last year,
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  and for a significant minority of those,
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  almost 40%, it's risen by a lot more than 25%,
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  less than 50% as AI starts to move beyond these isolated pilots and into
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  the investment phase.
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  Now, where is that investment going?
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  Well, a lot of it is going toward deployment at scale.
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  So it's software models, it's vendor licenses,
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  it's cloud and compute costs.
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  Further down the list is talent and then spend around governance,
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  which is a little interesting insofar as for some firms,
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  it feels like that adoption maturity is inverted,
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  where deployment is moving faster than the strategy around it.
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  And you see some firms spending on AI without necessarily having a clear plan
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  for where that spend should be applied, how it should be governed,
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  how that impact is going to be measured.
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  And so there's some catching up to do in some of those respects,
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  which is clearly difficult, of course, because the market is moving
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  so fast. We've got some other great data points around this in the article
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  version of the Pulse. So if that's something that you're interested in EY
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  PE Pulse and you can check that out.
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  Outlook for the next 6 to 12 months.
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  Now I'll close out with some brief thoughts on the outlook which I
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  characterize as broadly constructive.
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  Right now, nearly two thirds of GPs that we surveyed expect their firms
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  deployment activity to increase over the next six months.
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  That's down a little bit from the last quarter,
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  but it's up from the 56% that said that at the beginning of the year.
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  And some of the views around the PortCos back that up as well.
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  Right now, more than half of the GPs that we talked to expect both top line
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  and EBITDA to grow over the coming year.
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  54% say top line will grow, 60% say EBITDA will grow.
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  Only 8% expect declines.
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  And so that starts to set things up really well as we head into Q4 of this
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  year. Thanks, as always, for listening.
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  We'll be back in January with a recap of the year and more importantly what we
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  can expect in 2027.
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  The Global PE Pulse podcast from EY back next quarter.
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  For more on the latest market trends, go to ey.com/pepulse.