Private equity firms are grappling with a growing backlog of unsold software companies, a situation that could extend for nearly a decade at the current pace. Investor anxieties surrounding artificial intelligence’s potential disruption to the software sector are exacerbating the issue. As of June 30, an estimated 13,500 U.S. companies remained in private equity portfolios, a slight increase from the prior year.

This logjam includes approximately 4,000 companies held for six years or longer, with 1,500 companies exceeding a nine-year holding period. Historically, private equity firms aimed for three-to-five-year investment horizons, but these timelines have lengthened considerably. This prolonged ownership is prompting some investors to reallocate capital.

Fundraising totals for the first half of the year are mirroring 2025's subdued performance, with $159.6 billion raised. The market sees increased concentration, with capital flowing to a select group of established managers. Firms that heavily invested in software in 2020 and 2021 now face challenges with portfolio companies experiencing declining prospects and increasing debt.