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Lincoln Private Market Index Q2 2026 Overview

Lincoln International, a global player in investment banking advisory services, recently released findings from the Lincoln Private Market Index (LPMI), showcasing a promising rebound in the second quarter (Q2) of 2026. The index, which evaluates changes in the enterprise value of U.S. privately held companies, reported a growth of 1.9% in Q2, making up for much of its earlier 2.2% drop in the first quarter (Q1). This growth primarily stemmed from increases in earnings before interest, taxes, depreciation, and amortization (EBITDA), which counteracted a slight decline in enterprise value multiples.

This performance stands in stark contrast to broader market indices; for example, the S&P 500 saw a substantial 14.8% increase, with even more growth—15.4%—when excluding the top seven tech stocks often dubbed the 'Magnificent Seven.' This suggests a wider trend where private market dynamics are increasingly divergent from those of public markets, especially influenced by the rapid advancement of technology, particularly artificial intelligence (AI).

Key Drivers of LPMI Growth

The growth observed in the LPMI was attributed to strong operational performance from private companies rather than speculative multiples. Lincoln's analysis highlighted that technology and finance leading the charge in EBITDA growth, showing respective year-over-year increases of 8.5% and 6.5%. Industrial sectors, while trailing in growth rates, demonstrated resilience, indicating that these companies were somewhat insulated from the disruptions typically associated with technological advances like AI.

Steve Kaplan, a prominent academic in the field of entrepreneurship and finance, noted, "The LPMI’s dynamics signify that private enterprise value recovery is rooted in tangible operational improvements rather than inflated market expectations. The public market's recovery was likely a reaction to optimistic growth projections fueled by technology.'

Revenue and EBITDA Trends

Analysis of revenue performance revealed a steady upward trend. In Q2, about 70.7% of surveyed companies reported year-over-year revenue growth, an increase from 69.6% in Q1. Revenue growth itself also rose from 6.5% to 6.9%. This is particularly noteworthy when considering the broader economic context, as this revenue growth significantly outpaced the 3.5% increase in the Consumer Price Index (CPI) during the same period, implying that revenue growth was not merely a reflection of inflationary pressures.

Similarly, EBITDA growth improved from 4.7% to 5.6%, showcasing enhanced profitability across sectors. Interestingly, adjustments to EBITDA also saw a decline, suggesting improved reporting quality as the percentage of adjustments fell to 23.2% from 24.3%.

Deal Multiples and Market Trends

Despite the robust growth metrics, the competitive landscape for new deals reflected caution. Average enterprise value multiples for new buyouts settled at around 12.0x EBITDA for the first half of 2026, down from 12.8x in 2025 but still above the long-term average of 11.5x. There was a notable shift towards sectors producing lower multiples, such as industrials, at the expense of more lucrative, high-multiple sectors like software.

Software Industry Insights

As for the software industry, although fundamentals showed resilience, the valuations varied based on financial leverage. Revenue growth for this sector marginally improved to 6.8%, contrasting with slight moderation in EBITDA growth to 6.5%. A closer examination revealed that differentiation among software loans based on risk profiles and leverage was a growing trend, underscoring the necessity for nuanced evaluation strategies.

Ron Kahn, Managing Director at Lincoln, observed, 'The Q2 findings reinforce the importance of a comprehensive approach to software valuations, emphasizing business quality and capital structure rather than employing a one-size-fits-all methodology.'

Credit Market Stability

On the credit front, conditions remained stable. The size-weighted covenant default rate decreased to 2.7% from 3.1%, a sign of strengthening credit health among private companies. Moreover, Lincoln noted that while there's a general sense of stability, pockets of stress in older or over-levered credits persist.

As secondary market activity increased, particularly among private loans, this dynamic illustrated how lenders were adjusting to liquidity demands while managing risk. This trend created opportunities for liquidity exploration through strategic portfolio management.

Conclusion

In summary, the Lincoln Private Market Index paints a picture of cautious recovery in private markets during Q2 2026, underpinned by solid operational performance amidst evolving market dynamics. The ongoing differentiation between private company performance and the high-flying public market sectors reflects a complex investment landscape, one where operational fundamentals are proving essential for sustained growth amidst an ever-changing economic climate.