Blackstone, Apollo and KKR have agreed to take control of customer-experience software company Medallia from Thoma Bravo in one of the largest equity wipeouts in private equity history. The deal, announced Wednesday, sees Thoma Bravo absorb a $5bn loss on its 2021 buyout investment.

The transaction cements a dramatic reversal for the $4tn private equity industry, where losses of this magnitude are rare. Medallia will receive $150m in fresh capital from the new owners to reduce its debt burden, while the outgoing private equity firm walks away from a portfolio company that failed to deliver returns.

All three lenders had heavily financed the business, making its deterioration a direct concern well before the handover. This outcome signals how even marquee private equity firms can misjudge market conditions and growth prospects in the software sector.

The deal underscores mounting pressure on private equity returns amid rising interest rates and economic uncertainty. Portfolio companies face tougher scrutiny as lenders reassess risk exposure across their technology holdings.