Abstract digital data background

Private Equity Pulse

Private Equity Pulse: key takeaways from Q3 2026

Photographic portrait of Pete Witte
Pete Witte

EY Global Private Equity Lead Analyst

7 minute read 29 Oct 2026
Related topics
Private Equity

Stronger exits and increasing buyside point to a more balanced deals market for PE, as AI moves from pilots toward measurable value.

In brief

  • Private equity acquisition activity posts its strongest quarter in nine months, up 43% from Q2.
  • Exit activity continues to rise, with deals up 15% from Q2.
  • AI is moving from pilots toward measurable value: 40% of general partners expect net returns within 12 months.

Private equity (PE) acquisition activity rose in the third quarter of this year after a challenging first half. Firms announced 126 deals valued at US$228b, a 43% increase by value versus Q2, suggesting deployment has settled into a substantial, albeit selective pace, where sponsors continue to transact in spaces where they have conviction on earnings and a clear path toward long-term value creation.

General partners (GPs) remain constructive on the months ahead: nearly two-thirds (64%) expect their firm’s deployment activity to increase over the next six months, slightly down from 72% last quarter.

NextWave Private Equity Podcast

 Tune in to the latest episodes for insights into the private equity landscape.

Listen on Spotify
Listen on iTunes


Year-to-date, deployment is down 13% from 2025 – however, that’s attributable to fewer and smaller megadeals. Last year, there were 11 transactions above US$10b mark that contributed US$219b to the totals; so far in 2026, there have been only four deals above the US$10b mark, contributing US$114b to the year’s total. Below that threshold, deployment has remained resilient, with announced deal value rising 4% from last year.


The market continues to be cautious around tech as a result of AI-led disruption – 40% of firms report they have stepped away from a potential investment in the space over the last 12 months.


How EY can help

  • We guide you through potential capital-raising strategies and the organizational changes required to execute and sustain a successful IPO.

    Read more

Exit activity increases as distribution pressure intensifies for a growing share of general partners GPs

The third quarter brought further progress on one of PE’s most pressing challenges – liquidity. Firms announced US$212b in exits in Q3, up 15% from Q2 2026 and up 17% from the same period last year. In aggregate, exits have totaled US$875b over the last 12 months, an increase of 26% versus the prior 12 months.

 

As a result, realizations – as measured by deal value – are running nearly US$28b ahead of deployment this year, pointing to a healthier balance between putting limited partner (LP) capital to work and returning proceeds to investors.


The uptick in exits is a welcome development – two years ago, GPs ranked the pressure they were receiving from LPs around distributions at 5.6 on a scale of 1-10. That rose to 6.3 last year and held broadly steady at 6.1 in our latest survey. More telling is the level of intensity at the top end – 34% of GPs now rate the pressure at an 8 or higher, up from just 6% two years ago.

Many GPs expect the environment to improve further. More than four in 10 (42%) of those surveyed expect an increase in distributions this year, while just 10% expect a decline.



AI investment accelerates across the portfolio

While AI-led disruption continues to create uncertainty from a deployment perspective, the direction of travel as a value creation lever is becoming far clearer, with 80% of GPs reporting that AI-related spending across their portfolios has increased over the past year. For 39%, spending rose by between 25% and 49%, as AI moves beyond isolated pilots into the investment phase, targeting efficiencies and growth across the portfolio.


How EY can help

Where’s that investment going? Much of it is being directed toward the foundational elements required to deploy at scale. Software models, APIs and vendor licenses were among the largest areas of investment, cited by half of GPs, followed by cloud and compute infrastructure, alongside systems integration and workflow redesign. Roughly a quarter point to internal AI, data and engineering talent, the same share as data modernization, with a similar share citing the development of AI-enabled products.

 


The pattern highlights an emerging challenge – for many firms, adoption maturity is inverted. Deployment is moving faster than the strategy, governance and data capabilities that are required to support it. Some firms are spending on AI without a clear plan for where it should be applied, how it will be governed or how its impact will be measured. Without those decisions, spending can become fragmented, workflows can become inefficient, and errors can go undetected. Putting AI tools into employees’ hands can be done relatively quickly, but building clean datasets, establishing robust governance and deciding where AI should sit within the operating model take longer. Many of the firms we spoke with report being at an early stage, or report not having started on strategy and governance at the firm level, and many portfolio companies lag even further.


Some PE firms have invested directly in leading AI developers or formed partnerships with frontier firms intended to extend their capabilities across the breadth of the portfolio. In practice, these relationships often provide access to technology and specialist engineering expertise, but the work of turning a successful application into financial value still sits with the business. For PE, the opportunity lies in bringing those capabilities together and converting a working model into EBITDA enhancement.

This is underscored by the degree to which ROI remains in the early stages. Forty percent of GPs say benefits have begun to emerge, but have yet to be quantified financially, while another 27% have too few initiatives in process to effectively assess. A further 13% report measurable financial gains that have not yet offset their cumulative investment, and 19% are already generating positive net returns. The financial case should become clearer as initiatives mature and initial implementation costs are absorbed over time. Four in 10 (40%) expect AI investments across their portfolio to generate measurable net financial returns within the next 12 months, and a further 30% within one to two years.


Regional PE Pulses

Read the latest regional pulses

Summary

PE enters the final quarter of 2026 on firm footing. Outside of megadeals, deployment remains resilient, while stronger exit activity has moved realizations ahead of investment. The market remains selective, particularly in technology, as investors assess how AI could reshape companies and sectors.

The outlook for portfolio companies provides additional support. Presently, more than half of GPs expect both topline (54%) and EBITDA (60%) to improve over the coming year, while just 8% expect either to fall, allowing the industry to enter 2027 with renewed momentum and a clearer path toward growth.

Related content

How can PE teams guide portfolio companies to be exit-ready, not exit-reactive?

Exit readiness and exit preparation strategies are critical for private equity firms planning exits in the next 12 to 24 months. Learn more.

Konstanze Nardi + 1

How Europe can sustain its private equity momentum

Private equity boosts Europe’s competitiveness via capital, expertise and support, but sustained investment needs policies that attract private capital.

Ivan Lehon + 2

Six key trends shaping UK-US bilateral investment

Explore UK‑US investment trends, private equity, M&A and sector insights shaping the transatlantic corridor. Find out more.

Bridget Walsh + 1

About this article

Photographic portrait of Pete Witte
Pete Witte
EY Global Private Equity Lead Analyst
Helping clients and stakeholders understand the trajectory and impact of vital trends. Developing thought leadership and insightful content. Aspiring platform tennis pro.
Related topics
Private Equity

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.