AI Joins the Cap Table: Algorithms Are Now Powering PE Deal Sourcing

Good morning, ! This week we’re covering longer holds and fewer exits as private markets adapt to a liquidity crunch, AI’s quiet revolution in deal sourcing, Japan’s push to open its PE gates, and how covenant-lite lending is reshaping private credit discipline.

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DATA DIVE

AI Joins the Cap Table: Deal Sourcing Gets an Upgrade

Private equity used to run on Rolodexes and elbow grease. Now, it’s algorithms and APIs. AI is reshaping deal sourcing, turning vague signals into probability-weighted leads. Firms are deploying models that flag targets based on growth rates, profitability, leverage, and liquidity—basically scoring companies like a dating app for buyouts. And while AI won’t replace relationships, it’s becoming the most efficient third wheel in the deal process. Platforms like Grata and Sourcescrub are industrializing origination, indexing founder intent faster than your associate can cold email. The new math? Coverage + Credibility + Code = Competitive Edge.

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TREND OF THE WEEK

Longer Holds, Fewer Exits

Institutional investors are preparing to hold private market assets longer in 2025—despite growing pressure for liquidity. According to IFM Investors, only 41% of respondents now expect to exit investments within 3–5 years, down from 47% in 2023. The biggest shift? A tilt toward 7–9 year holds, now preferred by 14% of investors, up from 12% last year.

Why it matters: The private markets liquidity crunch is real. With IPO windows narrow and M&A still uneven, holding periods are lengthening—not by choice, but by necessity. Shorter exits (1–3 years) remain virtually non-existent, while ultra-long holds (10+ years) are fading.

For GPs, this signals a continued need for NAV financing, continuation funds, and bespoke liquidity tools. For LPs, it’s a reminder that capital is getting stickier—and that patience, not paper IRR, will define the next cycle.

Bottom line: Exit optionality is shrinking. Private equity’s next edge may come not from how it buys—but how long it’s willing to hold. (More)

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LIQUIDITY CORNER

Exit Freeze: Europe’s PE Market Runs Cold

Liquidity is drying up. European PE exits fell another 22.9% in Q2, with listings contributing a laughable €6.1B YTD—down from €121.9B in 2021. IPOs? Basically extinct. Sponsor-to-sponsor and corporate M&A are both down too, with holding periods now stretching past 3.6 years. Exit multiples are elusive, LPs want cash, and continuation funds are only plugging part of the gap. Until rates drop or someone finds a new exit button, it’s wait-and-hope season for sponsors. (More)

DEAL OF THE WEEK

OpenAI Bets $25B on Latin America's AI Future

OpenAI and Sur Energy have signed a letter of intent to build a $25B data center in Argentina, a project the Argentine government says could become one of the largest tech-energy infrastructure plays in the nation’s history. The facility would have a 500-megawatt capacity, built under Argentina’s investor-friendly RIGI tax incentive program.

Dubbed “Stargate Argentina,” this marks OpenAI’s first major AI infrastructure investment in Latin America, and reflects CEO Sam Altman’s broader push to scale LLM computing power globally—beyond the U.S. and Europe. The partnership comes just days after OpenAI’s new product rollouts and major brand integrations with Spotify, Zillow, and Mattel.

Why it matters:
Private equity firms betting on digital infrastructure and energy assets should take note. This is more than a flashy AI play—it’s a template for AI-driven data center projects in emerging markets, pairing compute-intensive workloads with energy partners in regions offering regulatory incentives, talent, and underutilized capacity.

Argentina may be an outlier today—but in five years, this kind of cross-border compute-energy JV might be standard practice. (More)

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PRIVATE CREDIT

Covenants? We Hardly Knew Them

Private credit has officially joined the covenant-lite party. In a market defined by fierce competition for large-cap borrowers, alternative lenders are tossing out the once-sacred protective terms that used to define the asset class. Around 75% of respondents say covenants have loosened in the past three years, as funds bend over backward to win mandates against BSL syndicates and rival direct lenders. While some argue BSL covenants tightened briefly during the 2022–23 volatility spike, that discipline didn’t last. By early 2025, repricings, dividend recaps, and eager investors erased the progress. The result? Borrowers are back in control—and the term sheets are starting to look like they were drafted by them, too. (More)

MICROSURVEY

Timing the Exit: What’s Driving Hold vs. Sell Decisions

In today’s deal market, the question isn’t just how firms are exiting — it’s when. According to our latest PE150 micro survey, no single factor dominates the decision to hold or sell. Geopolitical uncertainty (23%), interest rates (20%), and portfolio performance (20%) weigh almost evenly on timing.

For private equity sponsors, macro volatility remains the top concern, while corporate strategics focus more on buyer demand and sector consolidation. Consultants, meanwhile, point to asset performance as the ultimate trigger — suggesting fundamentals now outweigh market cycles.

The message: the exit clock is still ticking, but more cautiously. In 2025, timing isn’t about chasing the market — it’s about controlling the controllables. (More)

MACROVIEW

The Re-Golding of Trust

Gold didn’t get the memo about “transitory” inflation. While fiat currencies yo-yo under central bank gymnastics, gold has been playing the long game—quietly climbing past $4,000/oz. Over the past two decades, M2 growth and fiscal overstretch have left the dollar looking solid only relative to other paper. Gold, by contrast, is the only asset that isn’t someone else’s liability—and that’s increasingly how central banks and investors are treating it. The message? Trust, like monetary policy, has a shelf life. As sovereign debt loses its “safe” label, expect gold to keep reclaiming its role as the uncancellable reserve. (More)

THIS WEEK IN HISTORY

When the Music Stopped (October 2008)

Seventeen years ago this week, global markets fell off a cliff. Between October 8–10, 2008, the Dow plunged 18%, the S&P 500 shed a fifth of its value, and over $8 trillion in equity vanished. For private equity, the shock was existential: leverage evaporated, the syndicated loan market froze, and deal volume cratered nearly 80% in a single quarter. But chaos breeds opportunity. Distressed investors, secondary funds, and credit-heavy PE shops started writing a new playbook—buy cheap, stay liquid, and wait. By 2010, EBITDA multiples had reset from 10x to 6–7x, minting some of the best-performing vintages in modern history. Lesson still holds: dislocation rewards patience and dry powder. (More)

COMPLIANCE CORNER

Japan’s PE Rules: Samurai-Strict, But Warming Up

Japan’s Financial Instruments and Exchange Act (FIEA) runs a tight ship—full registration is required to manage or market funds, and it’s no joke. You’ll need dual licenses: one for Investment Management and another for Type II Financial Instruments. But if you’re only pitching to qualified institutional investors, the Article 63 exemption can save you the red tape (and the registration fees). Foreign managers aren’t off the hook either—unless you’re working through a local distributor, you’re looking at a domestic registration.

The good news? Japan is actively reforming the system to become Asia’s PE hub, including smoother paths for foreign asset managers. Just don’t forget: unregistered solicitation is a one-way ticket to a penalty town. (More)

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TWEET OF THE WEEK

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