While some PE firms want to push ahead and buy companies they believe will thrive in the AI era, their calls for term sheets are being turned down—a sudden retreat by longtime partners that has left sponsors frustrated.

"For some of these deals, lenders just say, 'Don't even think about it. We have too much software exposure. We are not going to fund another software buyout,'" said one M&A lawyer, who added they are working on two deals where parties have completed due diligence but no committed lender has been found. READ MORE