By Erin Griffith
January 27, 2017

This article originally appeared in Term Sheet, Fortune’s newsletter about deals and dealmakers. Sign up here.

If Cisco’s last-minute buyout of AppDynamics is any indication, 2017 could be less about the return of big IPOs and more about the continuation of big, brazen M&A. That’s bad news for IPO bankers, public market investors, the open marketplace (if consolidation means less competition), and reporters like me who want more transparency about how the so-called unicorn companies are performing.

But a rise in M&A is also bad news for private equity firms, a new study from PitchBook argues. Private equity firms are being “driven out of their own market” by corporate acquirers, according to PitchBook. Strategic buyers can justify high acquisition prices as long term strategic plays, where buyout firms need to be able to see the path to a profitable exit.

I’ve heard rumblings of this issue at buyout shops – they’re priced out of auctions for the best assets, and they’re having to get more creative. The result is an increase in carve-out deals, add-on acquisitions, and more firms building their own businesses around assets like wireless towers or servicing mortgages. PitchBook notes that add-on acquisitions made up 57% of buyout activity last year, an increase of 8% from 2010.

Nick Leopard, founder and CEO of private equity consulting firm Accordion Partners, says targets are especially hard to come by in the middle market. “Any middle market company probably fields a call a week from sponsors to see whether they’re interested in selling,” he says. But he views the phenomenon as a positive. “It’s good for the industry – instead of trying to buy something cheap, firms are now coming up with creative ways to deploy capital.”

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