The Trap of High Valuations and Slow Exits
Jason Greenberg, Global Head of Investment Banking Strategy at Jefferies, has highlighted a growing crisis in the private equity sector. Speaking on August 26, 2026, he warned that many portfolio companies are stuck in limbo. These assets, often referred to as zombie investments, lack clear paths to liquidity. The issue is particularly acute within the technology and media sectors. Investors are struggling to find buyers for high-growth software firms. This stagnation threatens to erode returns for limited partners across the industry.
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The High-Stakes Fight for Senate Majority ControlGreenberg explained that the current market environment makes it difficult to sell software businesses at previous premium prices. During the peak of the tech boom, valuations soared based on future growth projections. Now, those projections have not materialized for many companies. Consequently, private equity firms hold assets that are worth less than their book value. They cannot easily write down these losses without signaling weakness to the market. This creates a deadlock where capital remains trapped in underperforming ventures. The rise of artificial intelligence has further complicated the landscape. While AI offers new opportunities, it also disrupts existing business models. Many traditional software tools face obsolescence or intense competition from AI-native rivals. This forces portfolio companies to pivot rapidly, often without sufficient resources. As a result, they become zombie entities, alive but unable to thrive or be sold profitably.
Can AI Dealmaking Resolve the Stagnation?
The emergence of artificial intelligence presents a double-edged sword for private equity. On one hand, AI-driven deals are generating significant interest among acquirers. Companies seeking to integrate advanced capabilities are willing to pay premiums for relevant assets. However, this trend does not solve the broader problem of non-AI software holdings. Greenberg noted that while AI dealmaking is active, it represents only a fraction of the total private equity software portfolio. Most legacy software companies do not fit neatly into the AI narrative. Therefore, they remain stuck in the zombie category. The disconnect between hot AI markets and cold legacy software markets exacerbates the imbalance. Investors must now navigate two distinct environments simultaneously. Some assets command high bids, while others languish without interest. This bifurcation complicates exit strategies for fund managers.
The outlook for private equity software investments remains cautious. Industry experts expect continued pressure on valuations for non-AI firms. Funds may need to extend holding periods significantly. Alternatively, they might accept lower exit multiples to free up capital. The zombie investment phenomenon could lead to increased consolidation within the sector. Larger players may acquire smaller, stagnant firms to gain market share. Until the market fully digests the impact of AI, liquidity will remain constrained. Private equity firms must adapt their strategies to avoid prolonged capital lockups. The next few years will test the resilience of these investment models.
Who is Jason Greenberg? Jason Greenberg serves as the Global Head of Investment Banking Strategy at Jefferies. He also holds the position of Executive Chairman for TMT investment banking at the firm.
Frequently Asked Questions
What defines a zombie investment in private equity? A zombie investment refers to a portfolio company that remains active but lacks a viable path to exit. These assets typically suffer from stagnant growth or declining valuations relative to their acquisition cost.
How does AI affect software exits? AI creates a split market where AI-integrated assets attract higher bids. Meanwhile, traditional software firms without AI capabilities face slower exits and lower valuations, contributing to the zombie investment problem.