Why AI isn't killing finance software
1. Key Themes
AI Is Deepening Enterprise Finance Software, Not Disrupting It
The conventional narrative is that AI will hollow out legacy software categories. The M&A data tells the opposite story for CFO tools: "SaaS buyers believe AI will deepen CFO software, not hollow it out. Two of the three largest enterprise SaaS M&A deals in Q1 were directed at financial management systems, highlighting how automation can transform the office of the CFO."
Platform LBOs Are Stalling — A Meaningful Deviation from Consensus
PE dealmakers had broadly expected large buyout activity to rebound in 2026. Instead, it's contracting: "Platform LBOs were forecast to grow their share of PE deal activity to 25% or more. But...they have instead fallen to just under 19% through May, down from 21% at year-end 2025. The culprit is a convergence of pressures: Renewed tariff uncertainty has made forward earnings harder to underwrite, credit spreads have widened and made large deals more expensive to finance, and the growing scrutiny of PE-backed portfolio company quality has made sponsors more selective."
PE Pivots to Add-Ons as Platform LBO Engine Stalls
With large new platform deals harder to underwrite, capital is rotating into smaller, bolt-on transactions: "The result is a meaningful pivot toward other deal types — add-ons and growth equity deals. Add-on deals climbed to 74.7% of all buyout activity, a post-2023 high. Sponsors have leaned on existing credit lines and pursued more digestible deals rather than committing to large new platforms."
Robotics / Physical AI Hits a Record Funding Moment
The physical AI deployment cycle is attracting unprecedented VC capital: "Startups in the robotics industry grabbed a record $16.3 billion in VC funding in Q1 as physical AI moves toward deployment."
European Defense Tech Is Capital-Starved Despite Growing Domestic Interest
European defense tech is attracting local attention but still structurally dependent on outside capital: "The European defense tech industry is attracting a growing pool of homegrown capital, but 98% of startup rounds in the sector feature funding from outside the region."
2. Contrarian Perspectives
PE dry powder is abundant, but it won't unlock deal activity without macro clarity. The intuitive assumption is that $1.1T+ in dry powder will drive deployment. The article pushes back: "While sponsors will be aided by the more than $1.1 trillion in dry powder available to deploy, they will need better macroeconomic clarity to move upmarket on platform transactions." Capital availability is not the binding constraint — risk appetite and earnings visibility are.
Consumer AI growth is not the same as investor returns. Despite explosive topline metrics, the article signals a concentration risk most investors may be missing: "GenAI app downloads and sales growth exploded between 2022 and 2025, topping 3.8 billion downloads and $5 billion in revenue. But category growth and investor returns are two different things...the asset class is primarily a bet on 10 unicorn companies."
Private credit LP enthusiasm is cooling, not accelerating. Against the prevailing narrative of insatiable private credit demand, the data signals a turning point: "Fewer LPs plan to increase their allocations to private credit over the next year, according to a survey of institutional investors by Coller Capital."
3. Companies Identified
| Company | Description | Why Mentioned | Quote |
|---|---|---|---|
| AppsFlyer | San Francisco-based marketing analytics platform | Raised a $1B Series E at a $2.7B valuation from Google, Meta, and Moloco | "Secured a $1 billion Series E from investors including Moloco, Google and Meta at a $2.7 billion valuation." |
| Stark | Berlin-based drone startup | Raised €500M from Founders Fund and Sequoia at a €3.2B valuation — significant defense/autonomy signal | "Received a €500 million round from investors including Founders Fund and Sequoia at a €3.2 billion valuation." |
| Menlo Ventures | Silicon Valley VC firm | Raised $3B across two funds simultaneously — a notable LP confidence signal | "Raised $3 billion across Menlo Ventures XVII and Menlo Inflection IV." |
| Osanni Bio | Drug discovery biotech | Raised $190M Series B led by Patient Square Capital | "A drug discovery biotech, secured a $190 million Series B led by Patient Square Capital." |
| Cadence | Clinical AI startup focused on chronic disease care | Raised $100M Series C led by Spark Capital | "Clinical AI startup...which specializes in chronic disease care, raised a $100 million Series C led by Spark Capital." |
| Vacuumschmelze | German magnet manufacturer backed by Ara Partners | Agreed to be acquired by US rare earths miner Energy Fuels for $1.9B — rare earths/materials exit | "Agreed to be acquired by Energy Fuels, a US-based rare earths miner, for $1.9 billion." |
| EG Group | TDR Capital-backed gas station operator | Filed for a US IPO targeting ~$1B raise | "Filed for a US IPO and could raise about $1 billion." |
| Vibe.co | Ad tech company backed by Hedosophia | Agreed to be acquired by Walmart — signals Walmart's growing ad tech ambitions | "Agreed to be acquired by Walmart." |
| Allium | Blockchain data platform developer | Raised $40M Series B led by Amplify Partners | "Secured a $40 million Series B led by Amplify Partners." |
| Tetrix | Investment platform for limited partners | Raised $15M Series A led by White Star Capital and Innovation Endeavors | "Raises a $15 million Series A led by White Star Capital and Innovation Endeavors." |
| Quicken | Personal finance management software (Aquiline-backed) | Received strategic investment from Edward Jones — notable financial services cross-investment | "Received an investment from Edward Jones." |
| Attention | AI sales and revenue tools developer | Raised $30M Series B led by RTP Global | "Received a $30 million Series B led by RTP Global." |
| Rapalogix Health | Biotech specializing in cellular longevity in dermatology | Raised $20M Series A | "Secured a $20 million Series A led by GordonMD Global Investments and Woodline Partners." |
| Doncasters Group | UK aerospace precision parts maker | Qatar Investment Authority bought in ahead of NYSE IPO at $28–$32/share | "Qatar Investment Authority agreed to purchase $75 million in shares...ahead of the company's NYSE listing." |
| Pathfinder Clean Energy | London-based clean energy developer | Received €100M in convertible bonds from RGreen Invest | "RGreen Invest committed €100 million in convertible bonds." |
4. People Identified
| Person | Description | Why Mentioned | Quote |
|---|---|---|---|
| Jinny Choi | Senior Private Equity Analyst at PitchBook | Author of the 2026 US PE Midyear Update — primary analytical voice on LBO slowdown | "By Jinny Choi, Senior Private Equity Analyst" |
| Axel Andre | Newly appointed Partner and CFO at TPG | Notable senior hire at a major PE firm | "TPG named Axel Andre as partner and CFO." |
| Josh Elman | Partner, Andreessen Horowitz | High-profile hire at a16z; veteran operator/investor | "Josh Elman joined Andreessen Horowitz as a partner." |
| Ryan Cohen | CEO of GameStop | Withdrew a $35B potential bonus plan to focus on acquiring eBay — signals serious M&A intent | "CEO Ryan Cohen withdrew a bonus plan that could have paid him $35 billion" to pursue the eBay acquisition. |
5. Operating Insights
In a high-rate, high-uncertainty environment, add-on M&A is the de-risked path to capital deployment. With large platform LBOs stalling due to wide credit spreads and tariff uncertainty, PE sponsors are avoiding new platform risk and instead executing bolt-ons against existing lines: "Add-on deals climbed to 74.7% of all buyout activity, a post-2023 high. Sponsors have leaned on existing credit lines and pursued more digestible deals." For operators inside PE-backed platforms, this means more inbound M&A conversations — positioning as an attractive add-on target (strong unit economics, clean balance sheet, clear integration thesis) is increasingly valuable.
PE dealmakers are monetizing carry through loans — not waiting for exits. When exit windows close, liquidity-seeking behavior shifts to credit markets: "European PE dealmakers made 459 loan inquiries to one London broker in the first half of 2026, up from 134 a year ago." This 3x+ increase in carried interest loan inquiries signals that GPs are under personal liquidity pressure — which could influence their portfolio management decisions and urgency around operational improvement.
Consumer AI is becoming a winner-take-most market requiring concentrated bets. For fund managers allocating to consumer AI, the actionable takeaway is concentration over diversification: "The asset class is primarily a bet on 10 unicorn companies." Broad basket exposure to the consumer AI category is unlikely to generate strong returns; access to those specific unicorns is what drives performance.
6. Overlooked Insights
Walmart is quietly building an ad tech stack through acquisitions. The acquisition of Vibe.co — a connected TV and streaming ad tech platform — by Walmart is mentioned only briefly in the Exits section but signals an accelerating strategic push into retail media and programmatic advertising, an area where Walmart competes directly with Amazon Ads. No context or valuation is given, making it easy to miss.
A French semiconductor specialist (AlpSemi) is raising early-stage capital — a rare European chip play. AlpSemi received €17M led by Yotta Capital Partners and is listed without further description. In the context of European semiconductor sovereignty concerns and growing defense/AI chip demand, an early-stage French semiconductor company attracting institutional VC is a notable data point that receives no analytical framing in the newsletter: "French semiconductor specialist AlpSemi received €17 million in a round led by Yotta Capital Partners."