Welcome to this week’s edition of The Private Capital Compass, a curated weekly analysis from Private Capital Global designed to cut through the noise and surface what matters most and what it means for investors and operators.

This week, private credit saw double-digit stock declines amid growing AI disruption concerns. The selloff underscores a broader reckoning: an entire vintage of 2021-2022 software deals financed at peak valuations now faces structural business model erosion. Meanwhile, private equity's exit activity tells a paradoxical story, rising transaction volume but falling deal values, as sponsors finally prioritize LP relationships and fund velocity over holding out for covid-era multiples that aren't coming back.

In this edition, we examine Thoma Bravo's $12.3 billion acquisition of Dayforce, which signals both the return of mega-cap take-privates and the premium valuations commanded by genuine AI-native platforms versus legacy software retrofitting AI features. We explore the six forces Neuberger Berman identifies as reshaping private markets beyond near-term cycles, the striking disconnect between family office AI enthusiasm and actual portfolio allocations, and private equity's symbolic arrival in the NFL as the Patriots, backed by Sixth Street, faced off in the Super Bowl LX this past Sunday.

Compass Points

PCG’s Recap and Take on the Stories of the Week

• Private Credit's Software Concentration Faces Market Reckoning: Stocks of publicly traded alternative asset managers with significant private credit exposure plummeted Tuesday, with Blue Owl, TPG, Ares Management, and KKR down double digits while Apollo Global dropped 7% and BlackRock shed 5%, according to CNBC reporting. The selloff reflects growing investor concern about private credit's concentrated exposure to software and technology sectors being disrupted by AI. UBS analysts estimate 25-35% of the private credit market faces AI disruption risk, with software specifically accounting for approximately 20% of outstanding loans for private direct lenders—significantly higher than the 8% technology exposure in the high-yield corporate bond market (using the iShares iBoxx High Yield Corporate Bond ETF as proxy). The iShares Software ETF has declined 20% year-to-date as companies increasingly use tools like Anthropic's Claude Code to build proprietary software, threatening legacy SaaS business models. UBS projects that in an aggressive AI disruption scenario, U.S. private credit default rates could reach 13% compared to just 4% for high-yield bonds. 

  PCG Take: Private credit sold itself on relationship lending, covenant protection, and structural seniority. But none of those features protect you when the underlying business model becomes obsolete. The UBS analysis reveals the fundamental problem: private credit captured 40%+ of sponsor deal flow precisely when software valuations peaked and AI disruption was accelerating. High-yield bonds, with their broader diversification and lower tech exposure, are structurally better positioned for this cycle.

• Family Offices Talk AI, But Allocations Tell a Different Story: J.P. Morgan's 2026 Global Family Office Report, surveying 333 family offices across 30 countries, reveals a striking disconnect between AI enthusiasm and actual portfolio positioning. While 65% of global family offices plan to prioritize AI investments now or in the future, over half have zero current exposure to growth equity or venture capital, the segments funding the companies driving AI innovation. More surprisingly, 79% of family offices hold no infrastructure allocation despite its role as the physical backbone powering AI through data centers, connectivity, and logistics. The survey, conducted May-July 2025 amid political turmoil and economic uncertainty, shows family offices responding to inflation concerns by shifting toward alternatives, with inflation-focused offices allocating nearly 60% to alternatives (roughly 20 percentage points above average) and doubling down on hedge funds and real estate. Despite pervasive geopolitical risk concerns, 72% maintain no gold exposure and 89% avoid cryptocurrencies entirely. 

  PCG Take: The AI allocation gap exposes a broader issue in ultra-high-net-worth capital deployment: family offices operate on consensus timelines that lag institutional investors by 18-24 months. By the time family office investment committees approve "strategic AI exposure," institutional capital has already crowded into the obvious plays, compressing returns and increasing valuations. The infrastructure blindspot is particularly puzzling; these investors understand real estate, they understand private equity, yet they're missing the single largest capital deployment opportunity of the decade in power generation, transmission, and data center development. The cognitive dissonance around geopolitical hedges is also telling: families cite geopolitical risk as a top concern, then hold zero gold or crypto, suggesting either profound skepticism about alternative stores of value or decision paralysis when conviction conflicts with traditional portfolio construction. 

• Exit Velocity Over Exit Value: Global private equity exits rose 5.4% in 2025 to 3,149 transactions, yet total deal value declined 21.2% year-over-year to $412.1 billion, according to S&P Global Market Intelligence data reported by CNBC. This divergence signals an industry finally recalibrating expectations after years of holding aging assets and waiting for valuations to recover. The challenges stem from 2022, when the S&P 500 dropped 19% amid rising rates, yet many PE firms opted not to mark down portfolio company values, creating a widening gap between what sponsors believed assets were worth and what buyers would actually pay. The resulting backlog of tens of thousands of unrealized companies has suppressed distributions to LPs, who in turn reduced commitments to new funds. Fundraising fell 11% in 2025 to $490.81 billion, marking the second consecutive annual decline. Blackstone's Q4 results provided a positive signal, with $10.8 billion in realizations, the highest quarterly total of the year, and executives noting that "realizations have begun to accelerate." The Medline IPO, which raised over $7 billion and surged 30% post-debut, demonstrated that well-positioned exits can still command premium valuations.

  PCG Take: Sponsors who held assets through 2023-2024 hoping for a valuation recovery are now recognizing that LP relationships and fund velocity matter more than squeezing an extra turn of multiple out of every exit. The firms moving volume, even at compressed valuations, are the ones maintaining LP confidence and securing commitments for the next fund. What's notable is the bifurcation: mega-funds like Blackstone are accelerating realizations and executing landmark exits like Medline, while middle-market sponsors face a harder slog with fewer exit pathways and more valuation pressure. 

• Six Forces Reshaping Private Markets Beyond the Exit Cycle: While near-term dealmaking shows signs of recovery,with rising IPO activity and M&A increasing distributions through Q3 2025, Neuberger Berman's latest outlook identifies six secular forces that will define private markets performance over the coming years. These "Seismic Six" include: AI-driven disruption affecting both investment choices and operational efficiency; economic uncertainty that ends the 40-year tailwind of declining rates and rising valuations; deglobalization and populism fragmenting global supply chains; a changing investor base as individuals and sovereign wealth funds concentrate capital with mega-platforms (six firms raised 60% of 2024 capital versus 20% five years prior); consolidation through M&A and IPOs among private market firms themselves; and the ongoing liquidity crunch requiring multiyear normalization despite improving conditions. Neuberger emphasizes that the era of "free lunch" returns driven by market beta is over, placing pressure on firms to create value through operational improvements, strategic repositioning, and genuine alpha generation. The report highlights emerging opportunities in secondaries (buyer's market conditions), midlife co-investments (reduced blind pool risk), and capital solutions (flexible hybrid structures) as strategies positioned to capitalize on persistent liquidity imbalances.

  PCG Take: The most critical insight here is the bifurcation between managers equipped for this environment and those still operating on pre-2022 assumptions. The firms investing in AI for deal sourcing, portfolio monitoring, and operational enhancement are building structural advantages that compound over time. Meanwhile, sponsors still relying on multiple expansion and financial engineering are competing with one hand tied behind their backs.

• PE’s Growing Presence in the NFL (And Super Bowl): The New England Patriots' appearance in Super Bowl LX this past Sunday represents more than a championship opportunity, it marks private equity's symbolic arrival in the NFL's inner sanctum. Sixth Street, which acquired a 3% stake in the Patriots at a $9 billion+ valuation in September, becomes the first PE-backed NFL franchise to reach the Super Bowl, less than two years after the league cracked open its doors to institutional capital in August 2024. The Patriots join three other PE-backed teams: the Chargers, Dolphins, and Bills, with Arctos Partners (in talks to be acquired by KKR) holding 10% stakes in the Bills and Chargers, and Ares Management owning 10% of the Dolphins. The NFL's approach remains highly restrictive compared to other major leagues, only pre-approved firms (Sixth Street, Arctos, Ares, and a consortium including Carlyle, Dynasty Equity, and Ludis) can invest, stakes are capped at 10%, minimum hold periods are six years, and governance influence is severely limited. Despite these constraints, valuations continue climbing with each announced deal, creating what one legal advisor describes as "an elevator that everyone wants to get in."

  PCG Take: Two years ago, the NFL stood alone among major leagues in resisting institutional capital, concerned about preserving the "family ownership" culture that defined the sport for decades. Now, with four teams taking PE stakes and the Seahawks rumored to be next on the block post-Super Bowl, the question isn't whether more teams will sell minority stakes, but when the league will expand beyond its pre-approved consortium. The real story is asset class maturation: sports franchises have evolved from vanity assets for billionaires into institutional-grade alternative investments with compressed volatility, tax advantages, and appreciation that consistently outpaces public equities. 

Deal Spotlight: Thoma Bravo Acquires HCM leader Dayforce for $12.3B

Transaction: Thoma Bravo completed its $12.3 billion take-private acquisition of Dayforce, Inc., a global human capital management (HCM) platform provider, marking one of the largest software transactions in recent quarters. Dayforce stockholders received $70.00 per share in cash, representing a significant premium to pre-announcement trading levels. The deal, initially announced in August 2025 and approved by shareholders in November, removes Dayforce from public markets on both the New York Stock Exchange and Toronto Stock Exchange. 

Thoma Bravo, managing over $181 billion in assets and with a portfolio of 565+ software investments, positioned this acquisition as a strategic bet on AI-powered workforce technology. Dayforce serves thousands of customers globally with its unified platform spanning HR, payroll, time tracking, talent management, and analytics. CEO David Ossip will continue leading the company, emphasizing the partnership's potential to accelerate innovation and scale. Evercore advised Dayforce while Goldman Sachs and J.P. Morgan advised Thoma Bravo on the transaction.

Why It Matters: Thoma Bravo's acquisition reinforces the thesis that scaled, mission-critical vertical SaaS platforms with sticky revenue models remain the most defensible assets in software. HCM is a particularly attractive category, high switching costs, recurring revenue, and expansion opportunities through both product depth and geographic reach. Dayforce's unified platform architecture, which consolidates multiple HR functions into a single system, creates structural competitive advantages that justify premium valuations. 

Thoma Bravo is betting that Dayforce's AI capabilities in workforce analytics, predictive scheduling, and employee experience will create meaningful separation from legacy competitors like ADP and Workday. The market is bifurcating between vendors retrofitting AI features and platforms architected for intelligent automation from the ground up. Sponsors are paying premiums for the latter, recognizing that enterprises will increasingly consolidate their HR tech stacks around the most sophisticated platforms.

With public market volatility creating valuation dislocations and private equity firms sitting on over $2.6 trillion in dry powder globally, we're likely entering a new cycle of software take-privates. Thoma Bravo's willingness to deploy $12.3 billion on a single asset, while public SaaS multiples remain compressed, suggests confidence that private ownership can unlock value that public markets are underpricing, particularly through operational improvements, strategic M&A, and long-term product investment unconstrained by quarterly earnings pressure.

Deep Dive: Private Credit’s Perfect Storm

Blue Owl's stock hitting its lowest point since October 2022 is a warning signal for an entire vintage of software deals financed at precisely the wrong moment in the cycle. Between 2021 and 2022, private credit funds deployed billions into software buyouts at peak valuations, and now artificial intelligence is fundamentally reshaping the economics of those investments in ways that extend far beyond typical default risk. The confluence of factors created a perfect storm. Software valuations peaked in 2021 just as sponsors sat on record dry powder facing intense LP pressure to deploy capital. When interest rates rose and syndicated lending markets froze, private credit stepped in aggressively, growing from 15-25% of sponsor deal flow pre-COVID to over 40% by 2023. Thoma Bravo alone deployed $58 billion in 2021—deals like Proofpoint ($12.3B), Anaplan ($10.4B), and later Coupa Software ($8B) in late 2022. Vista Equity Partners matched the pace. 

Concentration Risk Magnified

The financing structure magnified the risk in ways that only became clear later. Traditional syndicated deals distribute risk across 30+ lenders, each holding manageable exposure. When syndication markets shut down, private credit funds wrote $500 million to $2 billion checks into single transactions. That concentration made sense when justified by higher yields and structural protections, until an entire vintage started deteriorating simultaneously.

AI's Structural Impact on Business Models

AI's impact goes deeper than increasing default probabilities. According to UBS analysis, private credit defaults in an aggressive AI disruption scenario could reach 13% versus just 4% for high-yield bonds. The divergence stems from portfolio composition: 25-35% of private credit assets sit in technology and business services, directly exposed to AI displacement. The most vulnerable companies handle administrative work, data analytics, or back-office functions, exactly the categories where AI tools like Anthropic's Claude, OpenAI's products, and Replit can replicate or improve functionality at a fraction of the cost.

The Team.Blue refinancing failure further illustrates the shift. Lenders didn't walk away because of catastrophic business failure, but because the forward investment case evaporated. Why finance legacy software infrastructure when buyers can build equivalent capabilities using modern AI tools? Vista Equity Partners launching an "agentic factory" to retrofit 90+ portfolio companies tells a similar story. CEO Robert Smith positioned it offensively, "AI will enable enterprise software to eat services", but the subtext is defensive: if your portfolio were naturally positioned for AI disruption, you wouldn't need emergency infrastructure builds to maintain relevance.

Why Private Credit's Structure Amplifies the Problem

Private credit's structural characteristics amplified the damage. First, concentration timing: capturing 40% of deal flow means you can't diversify across vintages the way syndicated lenders naturally do. Second, portfolio construction: while diversified bond funds hold thousands of positions, private credit funds typically hold 40-60 companies. When 20-30% share the same vintage, sector exposure, and valuation basis, concentration risk compounds. Third, duration mismatch: these deals assumed 5-7 year holds with clear exit paths, but rising rates extended timelines. Sponsors can't exit profitably, so they hold, increasing the probability that AI disruption accelerates before exit windows reopen.

The Double-Sided Exposure

The situation creates a double-sided exposure problem. Private credit also financed the other side of this trade, pouring $200+ billion into AI infrastructure: data centers, compute, model developers. The Bank for International Settlements projects this could triple to $600 billion by 2030. So lenders face simultaneous risk: AI displacing legacy software portfolios while potentially overbuilding AI infrastructure capacity. Whether AI accelerates or slows, a significant portion of the portfolio faces impairment.

The Retail Capital Test

Blue Owl's Q4 2025 redemptions, 17% versus the normal 5% quarterly cap, exposed the retail capital challenge. The evergreen fund model promised illiquidity premiums without decade-long lockups, but that only works when redemptions stay manageable and asset values hold. When investors pulled $2.9 billion from major BDCs in Q4 (up 200% from Q3), funds faced an impossible choice: meet redemptions by forcing asset sales and triggering portfolio-wide markdowns, or gate redemptions and prove the funds aren't actually semi-liquid. Blue Owl chose expanded gates, the rational decision that nonetheless confirms these assets can't be liquidated without material losses.

For private credit managers: Your 2021-2022 software vintage isn't coming back to par. The honest conversation you need to have internally is loss mitigation, not recovery scenarios. Which portfolio companies have defensible moats in an AI-native world, and which are fundamentally obsolete? The longer you delay that triage, the fewer options you'll have when LP patience runs out. Transparency with investors now preserves credibility for the next fundraise. 

For private equity sponsors: You financed these deals alongside private credit, and you're sitting on the equity beneath their debt. Your lenders' problems are your problems magnified. Extended hold periods mean higher fees eating into LP returns. Dividend recaps aren't available when coverage ratios are compressing. The Vista playbook of aggressive AI retrofitting works only if you have the capital, talent, and portfolio positioning to execute it. Most sponsors don't. If your operating partners can't credibly drive AI transformation at the portfolio company level, you're holding melting ice cubes financed with expensive debt.

For everyone: AI isn't the enemy. The firms that win this cycle will be those deploying AI for genuine operational excellence and commercial advantage, not defensive retrofits to preserve relevance. Customer acquisition costs, supply chain optimization, predictive analytics for demand planning—these are areas where AI creates measurable value today. The question isn't whether to embrace AI. It's whether you're building capabilities that compound value or just buying time before obsolescence catches up.

Closing Remarks

Thank you for reading this week’s edition of The Private Capital Compass. Throughout 2026, PCG will convene investors, operators, and advisors through a growing slate of curated events in Austin, Boston, Chicago, London, New York, and San Francisco, each designed to move beyond surface-level discussion toward practical insights, peer exchange, and real-world application.

Our mission remains consistent: to deliver clear-eyed analysis, relevant intelligence, and informed perspective that helps private capital professionals translate market signals into durable value across deals, portfolios, and platforms.

We appreciate your continued engagement and look forward to navigating the year ahead together.

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