The resurgence of private equity funds, fueled by the artificial intelligence boom, is thawing a previously frozen IPO market and providing vital liquidity to investors. As private equity faces challenges due to a stagnation in mergers and acquisitions, senior figures in the industry note that the current investment landscape is becoming increasingly “frothy,” complicating the search for promising startups.
Following the end of the zero-interest-rate era in 2022, the M&A and IPO sectors—key exit strategies for private equity—came to a near standstill. This lack of successful exits has led investors, including pension funds and endowments, to hesitate in committing to new funds. Tony Tutrone, the head of private markets at Neuberger Berman, highlighted the critical issue of monetization within private equity. At the recent IPEM conference in Paris, he remarked that while the market was slowly recovering in early 2025, external factors like the U.S.-led trade war had stunted this momentum.
However, the situation has shown signs of improvement as 2025 progresses, primarily credited to advancements in artificial intelligence. Large corporations are increasingly willing to pay significant premiums for AI startups, thereby creating favorable exit opportunities for private equity investors. Hala Fadel, a managing partner at Eurazeo, noted her firm’s recent sale of Cognigy, a German AI firm that automates customer support, to the publicly traded NiCE for nearly $1 billion. This transaction was heralded as the largest AI exit in Europe, indicating a more fluid exit environment as corporations seek to integrate AI into their operations.
The public markets are beginning to reflect this renewed optimism as well, highlighted by high-profile IPOs such as that of fintech giant Klarna. Additionally, Swiss company Verisure, which incorporates AI into its home security solutions, is poised to raise 3.1 billion euros on the Stockholm Stock Exchange—a move that could mark one of the year’s largest listings.
Despite this positive momentum, investors emphasize the necessity of a compelling AI narrative for companies seeking to go public. Christian Resch, head of growth equity at Goldman Sachs Asset Management, pointed out that companies with large addressable markets and exposure to AI technologies are increasingly attractive. However, this enthusiasm has led to fierce competition for promising AI assets, pushing valuations to alarming levels reminiscent of the late 1990s dot-com boom. Resch cautioned that private companies are being valued at multiples of 50, 60, or even 100 times their revenues.
Alongside these lofty valuations, investors face an additional concern: the risk that AI advancements could render existing business models obsolete. Miriam Schmitter, head of growth equity in Europe at CF Private Equity, expressed a common concern among her peers, estimating that many companies might have a 5% chance of becoming irrelevant in the next decade due to AI disruptions.
To navigate this uncertainty, some investors are pivoting towards companies that leverage AI to address immediate, high-cost challenges for established clients instead of pursuing theoretical growth potentials. Fadel from Eurazeo cited Cognigy as an exemplar, noting its successful automation of up to 80% of customer support tasks for major clients like Allianz and Lufthansa. “We focus on companies with strong use cases,” she reiterated, emphasizing the importance of immediate, tangible value in investment decisions.
In summary, while the artificial intelligence boom is revitalizing private equity and unlocking paths for liquidity, it also presents challenges that investors must navigate carefully in an increasingly competitive and unpredictable market.
