Expect more acquisitions of VC firms by large asset managers. The strategic driver isn't just AUM, but the ability to apply cutting-edge AI and tech from the VC portfolio to accelerate growth and EBITDA in their traditional private equity-owned industrial and consumer companies.
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The traditional PE strategy involves buying legacy companies and cutting costs by ~10%. AI enables startups to rebuild entire industries from scratch, slashing costs by 90-99%. This allows VCs to fund disruptors that can out-compete and dismantle sectors previously dominated by PE roll-ups.
Because boards lack deep expertise in AI's seismic impact, they are pursuing scale-driven M&A. The goal is to accumulate diverse assets ('cards in a deck') to maintain flexibility and strategic options in an unpredictable, AI-driven future, rather than making specific bets on the technology itself.
Venture capital is shifting from just funding disruptors to acquiring incumbent businesses, like a nonprofit health system. This provides a real-world environment for their portfolio startups to deploy and scale AI solutions, bypassing traditional enterprise sales cycles.
SoftBank acquired private equity firm DigitalBridge to solve its capital pipeline problem for large-scale AI projects. This move provides an in-house partner to ensure a steady flow of funding for data centers and other infrastructure, de-risking their ambitious AI build-out after facing previous funding challenges.
Madrona Ventures anticipates a rise in private-to-private mergers as a key trend for 2026. With questions about the long-term durability of even fast-growing private AI companies, consolidation is seen as a primary way for winners to emerge and build more defensible businesses in a volatile market.
Private Equity value creation has evolved. In the 2000s, it was driven by leverage; in the 2010s, by digital transformation. Today, AI serves as the new foundational "operating system" for growth, embedding intelligence into every process, contract, and customer touchpoint to drive returns.
Top-tier VC firms like Andreessen Horowitz are evolving beyond traditional venture investing. They are mirroring the playbook of private equity giants like Blackstone by acquiring other asset managers, expanding into new verticals like wealth management, and preparing to go public, prioritizing AUM growth.
The rapid evolution of AI means traditional private equity M&A timelines are too slow. PE firms and their portfolio companies must now behave more like venture capitalists, acquiring earlier-stage, riskier AI companies to secure necessary technology before it becomes unaffordable or obsolete.
Deal-making is evolving beyond same-sector acquisitions. A key trend is "intersector" consolidation, where asset managers acquire wealth or insurance firms. This strategic move aims to control a larger portion of the value chain, bringing the asset manager closer to the end client.
The strategy of acquiring incumbent companies to accelerate AI adoption is creating a new investment category. Unlike private equity, which optimizes existing assets for efficiency, this new class focuses on fundamentally transforming them into something entirely new.