The Numbers
U.S. private equity fundraising is down for the fourth consecutive year. Firms raised $222 billion across 348 funds through September 30, 2026. Annualise that and you get roughly $296 billion for the year, versus $330 billion in 2025 and a peak of $405 billion in 2023.
That is 27% off peak unless Q4 delivers an unlikely surge.
The fund count tells a sharper story: down 45% to 2,613 closings in Q1 2026 data from PitchBook. Fewer funds means fewer buyers in your process. Competitive tension is what moves price. Lose two or three credible bidders and the whole negotiation changes.
Middle Market Hit Hardest
Middle-market PE, the segment that buys most B2B companies between $10M and $75M ARR, fell 43% to $94.8 billion in 2025. Worst year for that cohort since 2018.
Meanwhile, venture capital fundraising dropped just 3.6% in the same period. LPs are still writing cheques to VC because AI is the trade everyone wants. They are pulling back on PE because PE has not been returning enough cash. Hard to raise Fund VI when Funds IV and V are still holding companies bought at 2021 prices.
What This Means for ANZ Sellers
PE still has $2 trillion in dry powder and recorded nearly $730 billion in exit value in 2025, the second-best year on record. But much of that capital sits in older funds that need distributions before the GP can raise again.
That changes buyer behaviour:
- More selective underwriting. Sponsors that cannot easily raise their next fund cannot absorb a bad deal in this one.
- AI risk on every B2B asset. Seat-based software with flat net retention is a hard sell to a buyer holding for five years.
- Cash trumps growth. Profitability and free cash flow carry more weight when the exit multiple is uncertain.
B2B generated approximately $126 billion of PE exit value in H1 2026, up 145% year over year, even as total exit realisations fell 14%. That points to a bifurcated market: durable, cash-generative companies with strong recurring revenue, efficient CAC, low churn, and a credible AI or productivity story remain attractive. Businesses dependent on multiple expansion face earn-outs, rollover equity, seller financing, and longer processes.
The Local Angle
Australian and New Zealand B2B founders are competing for a smaller pool of discretionary buyout capital, often from regional funds or global sponsors that have become meaningfully more selective since 2023.
Relevant diligence now focuses on recurring-revenue quality, gross retention, EBITDA conversion, customer concentration, international expansion capability, and defensibility against AI-native competitors.
Software valuations in PE portfolios were down roughly 8% through March 2026. The companies still getting strong sponsor outcomes are profitable, have retention data that holds up to AI questions, and run processes wide enough to keep several bidders at the table.
By the numbers, selling your B2B company to private equity has gotten harder every year since 2023.