After the Reset: Rebuilding Software Leadership for the Next Phase of Value Creation

Part One: Setting the Leadership Agenda for the Business You Now Own

Software was one of private capital’s most financeable sectors for much of the past decade. Recurring revenue, high gross margins and durable growth supported high valuations and increasingly large debt packages. Private credit became a major source of that financing, and by the end of 2025 software represented roughly one-fifth of direct-lending exposure.¹

Changing market dynamics, accelerated by generative and agentic AI, have challenged many of the assumptions behind that underwriting. Growth had already slowed by 2025,² while AI has forced software companies and investors to reconsider product differentiation, pricing models and the durability of competitive advantage. Markets repriced the risk quickly in early 2026: Buyout software holdings were marked down 9% in the first quarter, and median software loan bids fell by roughly six points between February and mid-March. Also, nearly $386 billion of software debt maturing in 2028 and 2029 keeps refinancing risk firmly in focus.³ ⁴

By August, software credit appeared to recover as earnings improved and investors saw more evidence of AI-related efficiencies and revenue opportunities.⁵ The recovery has been uneven, however, and that’s precisely the point: some businesses appear to have been only temporarily constrained by leverage or market sentiment, while others face more fundamental questions about product relevance, pricing, commercial productivity and competitive position.

For highly leveraged companies, that distinction can become an ownership question. Recapitalizations, restructurings and debt-for-equity exchanges can move lenders from creditor to shareholder. At that point, the investors’ mandate changes from protecting a credit position to rebuilding enterprise value, and the underwriting questions also change: Which parts of the business warrant investment, where should capital be redeployed, and can the governance and leadership in place deliver the next phase of value creation?

This is the starting point for our two-part series, After the Reset: Rebuilding Software Leadership for the Next Phase of Value Creation. Part One examines what creditor owners should establish before making management decisions: the investment thesis, capital priorities and board governance required for the next phase. Part Two turns to the leadership team needed to execute those decisions.

Restart or reinvent?

After recapitalization, the first fundamental question is: Was the capital structure the problem, or has the investment thesis changed?

Some software companies entered distress because leverage became unsustainable to service while the underlying franchise remained sound. In others, there were deeper weaknesses in product relevance, pricing power, commercial productivity or competitive position (Figure 1). A recapitalization can address the first problem. It cannot, on its own, solve the second.

The cause of the problem should decide the ownership mandate from the outset. A restart means the core economics remain attractive, and the priority is to restore investment and execution. A reinvention means the value creation plan itself needs to change. This distinction should guide where capital is deployed, which parts of the business are protected or reshaped and what capabilities the company will need next.

Figure 1:  Differing post-recapitalization mandates

Headline metrics can obscure the difference. A business under pressure may look more resilient in reporting than it is. Customer retention can hold because renewals were discounted. Revenue can rise because prices increased while usage weakened. Margins can improve because investment was deferred. The evidence that separates a restart from a reinvention often sits beneath these measures (Figure 2).

Few companies will fit neatly into one column. The purpose isn’t to force a binary label but to establish an evidence-based view of what remains worth backing, what needs rebuilding and where capital should go next. Board composition and leadership assessment should follow from that investment thesis rather than precede it.

Figure 2: Evidence that separates a restart from a reinvention

From investment thesis to leadership requirements

Once the business has been re-underwritten, owners have a clearer standard against which to assess leadership. That doesn’t imply wholesale management change. Executives who preserved liquidity, customers and organizational stability through distress may bring exactly the resilience and institutional knowledge a restart requires.

But workout performance shows one type of capability, not proof of future fit. A restructuring rewards liquidity preservation, centralized decisions and risk reduction. The next phase may require the leaders to redeploy capital, restart commercial investment, reshape products or pricing and make more fundamental choices about where the business will compete.

This is when leadership transitions from preservation to selective investment. In a restart, that may strengthen the case for continuity. In a reinvention, it may expose gaps in transformation experience, external pattern recognition or the ability to lead a different operating model.

Before management decisions are made, however, owners need a board capable of governing the re-underwritten plan and assessing leadership against it.

Before the leadership build begins

Taken together, these decisions establish the criteria for leadership assessment. Before deciding who should run the company, creditor owners should be able to answer four questions:

First, establish what the business is trying to become and how owners intend to create value; then build the governance needed to oversee that plan; only then define the leadership mandate. Starting with the people already in the room risks allowing the existing organization to shape the strategy rather than the other way around.

Part Two starts from that mandate. We’ll examine how creditor owners can assess incumbents, identify capability gaps, align incentives and determine where leadership should be retained, reinforced or replaced without losing the first year after recapitalization.

A recapitalization restores financial capacity. Value recovery depends on where owners deploy the capital, how the board governs those choices and whether leadership can turn them into enterprise value.

Authors

Pam Attinger co-leads Russell Reynolds Associates' Technology practice. She is based in San Francisco.
Heather Hammond co-leads Russell Reynolds Associates' Private Capital practice. She is based in New York.
Noah Schwarz is head of Private Credit for Russell Reynolds Associates. He is based in New York.
Sam Smith leads Russell Reynolds Associates’ Software practice. He is based in Chicago and San Francisco.
Emily Taylor co-leads Russell Reynolds Associates' Private Capital practice. She is based in New York and London.
Robert Alexander is a member of Russell Reynolds Associates' Technology Commercial Strategy & Insights team. He is based in New York.
Courtney Byrne is a member of Russell Reynolds Associates' Private Capital Commercial Strategy & Insights team. She is based in London.

References

_{¹ Sebastian Doerr, Egemen Eren, Ingomar Krohn and Karamfil Todorov, “Private credit’s software lending meets AI disruption,” BIS Quarterly Review, March 2026.
² David Lipman, Greg Callahan, Greg Fiore and Grant Kieffer, “Why SaaS Stocks Have Dropped—and What It Signals for Software’s Next Chapter,” ³ Bain & Company, February 9, 2026.
4 Bain & Company, Private Equity Midyear Report 2026, June 2026.
⁵ Iuri Struta, “Software debt sell-off signals cyclical turn for private equity and credit,” S&P Global Market Intelligence, March 24, 2026.
PitchBook LCD, “Software to the Rescue?,” The Credit Pitch, September 5, 2026.}