Is there anything that makes you excited about PE in 2026?
Look I am an overly analytical (some would say 'overthinker') type of person, especially when making personal life/job-decisions.
I reflected over and over about the PE industry and for the vast majority only found negative-datapoints re the outlook of this industry in the mid-/long-term.
What annoys me most is that you have to drink the kool-aid pretty hard in order to believe that what we are doing in the industry is generating significant alpha anymore.
How do you handle/deal with this all shenanigans? I mean for instance tweaking some models for the gazillionst of times, as if this would have any amount of predictive power whatsoever. Talking up the most random/shitty deals just because you are desparate to deploy capital? At this point in time I really start to believe that LPs would be much better off just investing in some liquid public-markets ETFs to generate higher returns with lower fees and equal (if not lower) volatility. It is absurd to me that we spend 1000's of hours overanalyzing companies and working people close to physical collapse just to receive equal/worse returns then LPs would have got by pressing the buy button on some public market ETF (please don't now drift off in a discussion on how asset allocation works, I just want to over-dramatize a bit to make my point).
Also, knowing that at a certain size, everybody looks at the same deals, has the same advisors, the same people .. it just feels so meaningless to me, like what value am I bringing to the table in this industry in 2026?
Have similar thoughts. Wondering if the solution is to join a boutique-type firm with a sub-$500m fund size as I feel there could be more alpha there
nahh thats where the zombie funds are
Name a few? The zombie funds are UMM names who haven't been able to exit in years
I just re-read Barbarians at the Gate to reminisce the good old days
All I’ll say here is think creatively - the LBO invented in 80s was truly at the cutting edge frontier of investing and that version of “cutting edge frontier” has evolved every decade or two. When SaaS buyouts first started out the traditional industrials corporate raiders thought it was BS. Now Thoma and Vista are getting disrupted by AI. You can’t get excited if you’re executing a known playbook at levered beta. Look around and think about on a first principles basis what could be truly new - it could be a vertical, strategy, sourcing, execution, people, geography. I think for the people who are willing to take a risk that could genuinely fail, that’s where the excitement is.
Hallmark of an innovative industry is going back to the 80s. Agree that there are innovative people left in the industry doing interesting things - but from a broad market perspective I'm not sure what PE is innovating other than new ways to justify continuation vehicles and extending ownership timelines to maximize value (management fees)
Most of the alpha is generated through value-add activities. For most UMM and MF, this is financial engineering and consolidation. It is very hard to have a differentiated strategy when dealing with companies that large since they typically have systems and processes in place that got them to that scale. The main value add would be distressed companies at that scale.
I've personally noticed that most of the genuine value-add happens in the LMM that take founder-led companies that are still not using an ERP system and not well-built infrastructure and applying a "professionalization" to the company and growing it through small roll-ups and fixing the base company. There are plenty of larger PE firms looking for a platform that they can scale, sponsor-backed companies looking for consolidation at the MM/UMM level to jump upstream, or large strategics that won't touch these LMM companies because it is too much work to professionalize and fix. If you roll up your sleeves and make these companies backable, then you can buy smaller industrial and B2B service companies for 4x-6x and sell the scaled platform for 6x-8x.
This is much easier said than done, and hard to deploy at scale for $1B+ size funds, but when you have a wave of retiring entrepreneurs that are desperate for an exit in these boring companies, there is a sizable market out there for this type of investing. It's just not sexy.
Hate to break it to you but taking advantage of baby boomers retiring and the professionalization of SMBs have been the hallmarks of LMM PE and Search Funds for the 10+ years. Nothing new here…. There is a reason why there are thousands of PE firms globally
Much easier said than done - the amount of work to even understand the financial performance of these founder owned businesses is a lot and to build the processes / implement the systems with founders, employees of businesses who don't know basic M&A concepts. Don't even get me started on these founder businesses who have unrealistic valuation expectations and not being able to do any form of business diligence
Sounds sexy on paper and easy to do but incredible amount of patience, work is needed for these type of plays
That's exactly why I said it's easier said than done. QoE's can only accomplish so much when the base information isn't reliably kept or made consistent year over year. That being said, doing a cash proof of earnings and then optimizing materials and labor costs for a manufacturing company is a way to get comfortable with the risk you are taking for not fully knowing the financial performance when accounting isn't GAAP compliant. It takes a special kind of crazy to take on the risk and then actually have the patience to do the work, but my initial point was that there is alpha in this space to generate...I didn't say it was easy to generate it.
There are plenty of founders who think their business should be worth 8x or more EBITDA when they are generating $1m-5m EBITDA in a widget manufacturing space, and those deals aren't transacting at those valuations, or some new fund is going to overpay just to get a deal done. A reasonable investor is going to only chase after deals that make sense, and not everyone is a reasonable investor.
You act like you just came up with some ground-breaking concept but what you are describing is what essentially every SC/LMM fund has done since forever? This is also a field that is heavily overcrowded. We have seen the buy and build playbook across vets, HVAC, education, etc.
Somehow with your answer you tried to convince me that there is still being alpha in the market but the example you just gave me is exactly one of those over-crowded pockets where everyone is trying to do the same and the opportunity is getting scarcer and scarcer.
Many feel the industry has become a grind where people overanalyze deals to match public market returns, making one wonder what real value is being added in 2026.
No in PE but as others said you have to either be a part of an innovative new field or you have to take on more risk, be more entrepreneurial, and own your own PE firm.
In 2026, working in PE is only exciting for your base + bonus and to impress normies. The odds of you being one of the 10% of analysts/associates to make VP AND realizing carry are low. To make more money than you would in banking/HF, you'd need to get lucky, have a differentiated strategy, or start your own shop (i.e., collect fees).
The industry has been extracting value out of companies since the 80s and there's no way to outperform if everyone has the same playbook. I personally left the industry and am getting my MBA at HSW. I'm gonna pursue entrepreneurship and do banking as a backup.
Did PE for 2 years in a MF and went back to Banking, all of the points you mentioned resonated with me and I felt it just wasn't worth it anymore
Yeah I think so as well, the PE industry feels just too saturated now in 2026. Especially with the mega funds having multiple distinct strategies. Also, from the LP perspective you need significant capital to start a new fund in order to compete with the megafunds.
Whenever I see a post like this I’m reminded this platform is flooded with interns/analyst that have no idea what PE is actually like above the associate level.
Yeah please don’t pursue PE and stay in banking please, your intelligence matches thay job
It’s a moment where a lot of priv companies are trading at nothing given uncertainty which can create a big buying opportunity. To another user’s point above, a few firms e.g. thrive leaned into buying service companies and optimising through AI early and have generated nice 3x + deals like that without leverage. While a lot of firms are doing this now and it’s less differentiated, there are still PE firms consistently outperforming the market, you just have to go to places willing to be opportunistic and leaning into hairier situations
My $0.02 is you should just take the emotion out of your decision and be rational about your desires and the best way to realize them.
PE is currently at the end of a cycle characterized by ultra cheap debt, stabilized global capital markets, technological innovation, and increasing hype. Recently deployed funds were piled into sky high valuations before rates came up and are now stalling out as a result. I don't expect a dramatic crash, but the idea that you're going to clip your check on the back of multiple expansion in the next few years doesn't seem more likely to me today than it was in the past.
Rather, there's probably going to be a prolonged period where GPs and LPs are unwilling to transact on these companies and as such the portcos will have to actually grow into a larger valuation that can support a modest return. And that will take time, which will result in shitty IRRs and lower, more long-dated carry distributions (if any). This will shake out a lot of people currently in the space, and I don't blame them.
That's not to say PE will never have another "golden era", but that is not what we're in the early innings of right now, imho.
Personally, I think you're more likely to make money and succeed when that success is grounded in creativity, when your job allows you to ply your natural abilities in a medium that suits them, and keeps you in the company of colleagues/clients/counterparties/etc. you enjoy. If you are forcing yourself to endure an environment you dislike, but have convinced yourself is "the (only) way", maybe reconsider if that's really true.
Remember that all great things, including LBOs, once started as someone's idea that they took a risk on before it was the obvious thing. Perhaps you have to go find something you can feel a bit more authorship of, and make your mark on.
PE still impresses a certain kind of woman that lives below 14th street on the West Side of Manhattan. Other than that, there is nothing to look forward to in private equity. It’s prob worth doing for two years as the right firm still carries a lot of weight to raise money in the future, you might expand your professional network, you’ll learn how deals are done. But pursuing a career in PE is kind of stupid unless you can guarantee you will be promoted to partner (i.e. your father in law runs the firm).
Very specific to myself but PE investing into digital health has picked up this year.
Many of the impressive operators I know in healthcare that have an appetite for risk end up in these companies at mid-level / senior roles. Hoping to follow the same path post consulting.
I’m excited to quit… :) 6 years and counting, it’s been enough
Congrats on making the decision. What drove you to quit (assume mix of seeking better WLB and fund returns not great)? What's next for ya?
I think it’s much simpler than all this. Yes you can go down the hard route to differentiate find alpha do something unique invent something new etc etc.
The easier answer is to just catch a thematic wave (eg AI) and ask are you positioned to surf the wave or are you fighting it?
One can only do so much on their own..
Harum non corrupti quos voluptatem. Aut non odio illo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Ut animi velit saepe saepe aut commodi. Accusamus aliquid officia ut ea est. Et quidem minus doloremque. Accusantium quia in ratione vel libero ea pariatur.
Sit omnis ut voluptatum enim. Nihil aut quo molestiae culpa.