The Lex column on the “SaaSpocalypse” (“Private equity’s software bets are caught in the maelstrom”, Lex, February 11) rightly highlights the valuation shock facing software-heavy private equity portfolios, but it risks overstating the implications for private credit.
For lenders active in European private markets, the disruption caused by artificial intelligence is neither especially new nor unpriced.
AI risk has been a core underwriting consideration since late 2022, particularly for software and technology businesses. With the greater influence of AI, narrow tech solutions face genuine displacement risk, while broader platforms, so-called ERP cloud-based systems and bundled services that integrate AI are often net beneficiaries. Treating “software” as a monolith obscures this distinction.
Private credit’s relative resilience also reflects the asset class’s structure. Technology businesses typically carry the largest equity cushions in the market, offering meaningful downside protection even as enterprise value multiples compress. Private credit has both the flexibility and capital to support fundamentally sound companies through periods of volatility.
AI will undoubtedly create further moments of market noise as the technology evolves. But for disciplined private lenders focused on cash flow durability rather than exit timing, the challenge is one of selectivity rather than systemic stress.
In that sense, today’s repricing looks less like a reckoning for private credit and more like a long-anticipated sorting process.
Nick Baldwin
Managing Director, Valuations & Opinions, Lincoln International, London WC2, UK
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