Is private equity’s love affair with the software industry over?
Perhaps not yet, but recent analysis by accounting and advisory firm Cherry Bekaert suggests sponsors’ interests are shifting.
Software-related transactions totaled $10.7 billion in value over the first six months of the year, according to the firm’s mid-year report on private equity deals. That marked a 65.7% year-over-year decline. It was also down a whopping 90.3% from the sector’s peak three quarters ago, according to Cherry Bekaert.
Scott Moss, the firm’s partner and financial services leader, pointed back even further, noting the sector has cooled significantly from a heyday in 2021.
“There are still a number of private equity groups dealing with the overhang of 2021,” Moss said in an interview. “As interest rates and inflationary pressures were picking back up, I think that put a considerable amount of pressure on that field.”
If PE sponsors are investing less in software, where are they putting money now? Perhaps unsurprisingly, the energy sector.
In a bid to capitalize on the latest artificial intelligence boom, some firms see value in pouring money into data center infrastructure. Where the value of software deals fell, the total value of energy-related deals ticked up 80.5% over the first six months of the year, per Cherry Bekaert’s analysis.
“The very AI build-out that threatens software is also powering the quarter's most durable sector,” the company’s report stated. “The artificial intelligence layer that is hollowing out software valuations is simultaneously rebuilding the investment case for the physical infrastructure that feeds it. Sponsors have noticed, and they are rotating accordingly.”
Among megadeals involving energy over H1, the report pointed to Stonepeak and Bernhard Capital Partners’ $6 billion acquisition of Cleco, a Louisiana utility company. Cherry Bekaert said the utility ended up in PE ownership “because data center load growth has recast it as AI infrastructure.”
The long-term prospects of both AI systems and the data centers that power them are still unclear. Across the U.S., there’s been a seemingly bipartisan pushback against data centers in communities, with both New York and Texas enacting moratoriums on the construction of new data centers.
For his part, Moss suggested that PE sponsors are factoring the political blowback and cancellations of some data center projects into their pricing over the short term. The longer-term impacts of open-weight large language models being developed in China, which wouldn’t seem to require as intensive data center infrastructure, aren’t yet clear. Moss said that’s a “bit of an unknown at this point.”
Meanwhile, Cherry Bekeart’s analysis unveiled a small year-over-year uptick in private equity deals across the board. The firm found that sponsors closed on 2,384 deals in 2026’s second quarter, which researchers described as “essentially flat” compared to the first quarter. However, that figure marked an 11.5% year-over-year increase.
Moss also noted an uptick in bolt-on deals so far this year. “Hardly a day goes by that we don't have a conversation with a CFO who’s contemplating one or more add-on transactions between now and the end of the year,” he said. “The add-on market remains robust. I think it’s squarely focused on middle-market activity, deals that are generally a little bit smaller in transaction value.”
