Bain’s midyear report says a deal that needed 5% EBITDA growth a decade ago now needs roughly 12% to produce the same return. Here’s what the report says about AI, and what we’re seeing on the operating side across PE-owned businesses.
“12 is the new 5.”
That is Bain’s shorthand for how a deal that needed 5% annual EBITDA growth a decade ago now needs roughly 12% to produce a 2.5x return over five years. The Private Equity Midyear Report 2026 also says that purchase multiples and financing costs are elevated, which makes dealmaking as expensive as it has been at any point in the industry’s history.
Most of the return now must come from earnings growth, and the report has a great deal of supporting detail on why that’s difficult today. Bain puts the implied capital cycle at about seven years, far longer than historical norms:
Source: 2026 Bain Private Equity Midyear Report
According to the report, the majority of buyout assets currently held were bought in 2021 or before, and distributions as a share of NAV have been at record lows for four years running.
Bain also asked LPs about markdowns and found that most lose confidence once an exit prices more than 5% below the last mark, which is part of why GPs are choosing to hold. Waiting isn’t free, though. IRR is annualized, so a seven-year hold needs a higher exit price than a five-year hold just to land in the same place.
AI should be a top priority
On AI, Bain writes:
“For private equity, AI is rapidly becoming one of the most important value-creation opportunities across the portfolio. Inaction, in fact, has become a strategic choice, not a neutral decision.”
Their read is that the companies getting results have used AI for redesigned workflows and operating models. Adding tools on top of processes that stay the same has produced much less value.
Reduced software deal values
Software deal value fell 70% from Q4 2025 to Q1 2026. Public software valuations dropped nearly 30% in February, and private software marks came down about 8% for the quarter, with Europe off 4.2% against 8.9% in the US. Bain calls this the “SaaSpocalypse.” Tech-focused GPs are reworking how they diligence assets in response, since a lot of software revenue now has to be underwritten against the chance that a model does the same job for less.
At RapidCanvas, we’ve been partnering with PE firms on this problem, and technology-driven have found that operational alpha remains the quickest and most cost-effective route to EBITDA growth. Here’s how we approach it.
1. Targeted scope, high impact
The common instinct after a new sponsor takes control is to go horizontal. Replace the ERP with something AI-native, stand up a data platform, buy several SaaS tools, then bring in consultants to connect them. Those programs have long development cycles. Eighteen months is normal, and a good portion of the license spend covers modules the business never turns on.
Our approach is to identify the specific bottlenecks and build against them. For example:
- Quoting that takes four days and costs deals
- Collections that leak because nobody can see aging by account manager
- Overtime that shows up as a labor variance every month because scheduling still happens in a spreadsheet
Problems like those can usually be fixed in weeks, and the fix lands in the numbers the same quarter it ships. Most value creation plans get their first serious review around day 100.
2. Build assets the next buyer pays for
Anything built during the hold period should be something a future acquirer will pay for, and a lot of portfolio technology doesn’t clear that bar.
Black-box tools get flagged in diligence. So do vendor contracts that reprice at renewal, and models nobody at the company can explain or retrain. The buyer’s team will ask whether a given margin improvement will survive the transaction. If the answer depends on a third party’s pricing decision, that improvement tends to get discounted in the value bridge, or taken out of it altogether.
Importantly, we build so that the IP is yours. The code and the models sit with the portfolio company, which makes the operating gain easier to defend in the CIM.
3. Experts who know what to build
AI can be expensive, and a significant amount of what gets built doesn’t need to be AI at all. Standing up a multi-agent system for a problem that ordinary code could handle adds inference cost every month, plus a maintenance burden. Therefore, it is critical to choose AI projects wisely, with clear goals and timelines before the work begins.
Our Hybrid Approach™: tailored to the needs of PE businesses
RapidCanvas delivers focused AI initiatives that are designed to drive ROI in weeks, rather than months or years. Our Hybrid Approach™ combines the scale of an agentic AI platform with the judgment, governance, and expertise of both your team and ours. Using this model, we tailor proven agentic solutions to the specific goals, workflows, and tech stack of your portfolio companies.
The RapidCanvas Enterprise Context Engine™ is a living intelligence layer that unifies your company’s data, workflows, and institutional knowledge into one system. It captures entity mappings, business definitions, decision logic, and accepted patterns, continuously updated and validated by your team, so every AI agent reasons with your business’s actual context instead of a generic model’s assumptions.
That intelligence is 100% owned by you, so you create competitive advantage while also mitigating concerns that vendor pricing changes might reduce business value over time.
Further, much of what gets pitched as AI transformation is really a data problem or a reporting problem. We spend time up front working out which parts of a problem benefit from machine learning and which parts are better served by a well-built pipeline and some SQL. Then we build solutions designed for material impact on your P&L.
Usually, the assets that benefit most from focused AI solutions were bought before anyone had a coherent AI plan. A transformed process and workflow demonstrate value in the first diligence session. If you’d like more information on RapidCanvas and how we have helped PE businesses improve business results in ways that create genuine value, get in touch. Or, you can visit our website and read verified customer reviews on G2.
