PE firms want software deals, but lenders don't want to fund them
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Summary
Private equity firms are finding lenders unwilling to fund software buyouts, with major private credit managers including Blue Owl, Blackstone, Apollo and BlackRock's HPS having scaled back new software loan originations as AI threatens to disrupt software businesses. Credit spreads on the best software deals have widened from 400–450 basis points to 550–650 basis points, with some reaching 800 basis points.
Market Impact
The retreat from software lending has halved U.S. software buyout volume in the first five months of 2026 versus last year's pace, and forced deal structures to reduce debt from 60% to 40–45% of purchase price. The shift is reshaping LBO financing and may accelerate activity in adjacent sectors like digital infrastructure. This analysis is informational and avoids any directional trading claims.
Why It Matters
It shows how AI-driven disruption risk has moved from equity valuation debate to credit underwriting, directly constraining capital available for software M&A.
Key Points
- Major private credit lenders including Blue Owl, Blackstone, Apollo and BlackRock's HPS have scaled back new software loan originations due to AI disruption risk.
- U.S. software buyout volume was roughly $17 billion in the first five months of 2026, about half of last year's pace and only 17% of the $99.2 billion in the same period in 2022.
- Credit spreads on software deals widened from 400–450 basis points to 550–650 basis points, with some reaching 800 basis points.
- Debt now accounts for 40–45% of purchase price on buyouts, down from a standard 60%, forcing PE firms to use three-way equity structures.
Key Entities
Evidence
Roughly $17 billion worth of US software buyouts were closed or announced during the first five months of this year, according to PitchBook data. That figure is about half of last year's pace and represents only 17% o...Supports: Supports the buyout-volume decline.
Credit spreads on the best software deals had been hovering around 400 to 450 basis points over the benchmark rate. Now lenders are pricing those same deals at 550 to 650 basis points, according to people familiar wit...Supports: Supports the spread-widening figures.
Debt now often accounts for 40% to 45% of the purchase price on buyout deals—down from a standard 60% in prior years.Supports: Supports the reduced leverage point.