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EQT has warned that fears that AI will destroy many software businesses will stall private equity firms selling their investments in the sector because buyers will not match asking prices.
Novel AI plug-ins released this year sparked a flight from publicly listed software companies as investors feared that their services could be rendered obsolete.
This hit the share prices of buyout groups including EQT that had backed companies in the sector, signalling potential strains in private equity’s decade-long bet on software and a growing disconnect between sellers and buyers over valuation.
Both KKR and Blackstone’s shares have fallen 19 per cent since the start of the year, while EQT’s shares are down 9 per cent.
“In the private markets I would expect at least in the near term . . . a lower level of deal activity in software,” said Per Franzén, chief executive of the Stockholm-listed buyout group. “That bid-ask spread is probably significant.”
Firms such as EQT that were sitting on “well-performing” software businesses would not want to sell them at a discount while the market was down on the whole sector, he added.
Software investments represent about 15 per cent of EQT’s €16bn buyout fund launched in 2020 and nearly a third of its four-year-old €22bn vehicle, the firm said. It said on Wednesday it had marked down the software portfolio but declined to say by how much.
Software company listings that had been touted for 2026 were “unlikely to happen”, Franzén added, as the private equity industry reels from a dramatic sell-off in the sector that was one of the biggest recipients of its investment over the past decade.
EQT, which manages almost €270bn in assets, planned to focus on selling or listing non-software holdings from its six-year-old buyout fund in the near term, Franzén said.
Despite the sector’s sell-off, EQT said it expected the software companies in which it was invested would report about the same net sales and earnings growth in 2026 as last year. Franzén added that EQT was invested in companies that sold “mission-critical” software, which were protected from AI displacement.
“If you are instead exposed to business-to-consumer software . . . the disruption threat is very real,” Franzén said.
He added that EQT’s portfolio companies had been integrating AI, noting that Swedish software group IFS, valued last year at €15bn, was planning to cut about a fifth of its 5,000-strong workforce this year “thanks to realising AI-driven efficiency gains”.
Franzén said EQT was exploring using future buyout funds to buy listed software companies at bargain prices where it believed they would win from AI.
EQT’s total fee-paying assets under management in the first quarter were flat at €142bn compared with the previous year. The firm deployed €6bn in the quarter, slightly more than in 2025, but its exits were slightly down to €3bn.