After a decade of cheap debt and rising multiples, private equity faces a fundamental reset. The excess of 2021/22 masked how much industry performance depended on leverage and abundant liquidity. That model has not entirely collapsed, but it no longer clears as much as it used to. What is emerging instead is a more selective market where capital is available but conditional, and returns depend more on execution.

This shift is most visible in exits, where strong, cash-generative businesses continue to transact at resilient valuations while weaker assets struggle to sell at any price. The divide has widened despite initial optimism at the beginning of 2026. At the Private Equity Insights Conference in Paris, industry leaders described distributions as 'quite polarised,' with activity concentrated at the lower end of the market where assets can still be integrated into larger platforms. This liquidity filter reflects a market that has become very selective.

Value creation has moved inside companies, with operational involvement replacing purely financial structuring. Where 5% EBITDA growth could once support an investment case, the bar has shifted materially higher, with 12% replacing the old 5%, according to Bain & Company. Sector expertise, networks, and operational support are now prerequisites to building resilient assets capable of generating returns for LPs. Artificial intelligence also plays a part in this transition, framed as 'an opportunity rather than a threat,' particularly in driving sales and accelerating product development.