Key Takeaways
Deal activity: While deal count is down 5% on
a YTD basis compared to 2024, dealmakers believe the market is
improving and transaction activity has the potential to accelerate
over the coming months.
Liquidity: Liquidity remains a key challenge
in the private equity industry, with low distributions and extended
holding periods. Exits are improving compared to last year but will
need to meaningfully increase to work through the current backlog
of portfolio companies.
Secondaries: The secondaries market is off to
a record-breaking start, already eclipsing $100B in aggregate
transaction value through H1 2025. Growth is expected to continue
in the second half of the year, driven by the rising demand for
liquidity.
IPOs: The IPO market had a strong summer and
entered fall with a solid pipeline. The private equity-backed IPO
market is gaining momentum but still remains below pre-pandemic
levels.
U.S. PE Deal Activity
August activity: U.S. PE deal counts declined
for the second consecutive month in August. However, deal values
jumped following two months of lower announced values.
Deal value: Deal value is up 30% YTD through
the end of August compared to last year. Over the last few years,
the proportion of US PE deals over $1B has been steadily increasing
and the number deals with a disclosed deal value over $1B has
reached almost 40% in 2025 YTD.
Liquidity
Distributions: Data shows five-year DPI is the
lowest in over a decade, as LPs are waiting longer for capital to
be returned.
Holding periods: Average holding periods for
buyout deals reached 6.4 years in 2025, reflecting sponsors’
preference to delay exits rather than exit at lower
valuations.
Exits: Exits are ticking up compared to last
year, but a significant rebound will be needed to return capital
and reduce the backlog of portfolio companies awaiting liquidity
events.
Secondaries
Transactions: The secondary market has
experienced unprecedented growth in the first half of 2025, with
total deal value growing by 42% compared to H1 2024.
Fundraising: Despite a lower fund count, PE
secondaries fundraising is on pace to exceed last year’s
total.
Continuation funds: Capital raised for
continuation vehicles has already surpassed full year 2024 with
both single and multi asset funds experiencing growth.
IPOs
Summer activity: The summer months between
June and August saw seven PE-Backed IPOs across a range of
industries.
Fall pipeline: At the end of August, three
PE-backed companies had filed to IPO: Phoenix Education Partners,
Black Rock Coffee and Legence.
IPO market: The PE-backed IPO market is
showing strong momentum, though activity remains far below
pre-pandemic norms.
Fundraising Trends
PE fundraising: US PE capital raised is on
track to finish 4% up compared to 2024, while the number of funds
closed is on track to finish 7% below last year.
Funds in the Market: Buyout funds account for
57% of the capital being raised in the market, the largest amount
of the sub-strategies, followed by growth funds at 23% of the
capital being raised. Secondaries strategies have the largest
average fund target size.
Q2 Earnings Recap
Sentiment: While acknowledging recent market
headwinds and volatility, public PE executives expressed confidence
on Q2 earnings calls, pointing to various megatrends expected to
drive growth and forecasting a pickup in transaction activity.
Growth Drivers
Brookfield
“This opportunity set is large and compelling and
is driven by three powerful themes, which we have
discussed for years with you: digitalization,
decarbonization, and deglobalization. These three Ds are
more relevant today than ever before. They have
expanded and are converging in ways that are accelerating
demand for capital at a global scale.”
– James Flatt, CEO
Blackstone
“Our deployment has emphasized areas benefiting
from long-term secular megatrends, such as digital and energy
infrastructure, digital commerce, private credit, life sciences,
and India. These areas have also been among the largest
drivers of appreciation in our funds. In particular, the
enormous need for debt and equity capital to build the
infrastructure powering the artificial intelligence revolution has
created extremely positive dynamics for our
business.”
– Stephen Schwarzman, Chairman, CEO and Co-Founder
EQT
“Mid to long-term, though, the secular growth
trajectory remains very much intact…The largest
share of the expected growth in absolute terms will continue to
come from institutional investors. But the most rapid relative
growth will come from the Private Wealth
segment.”
– Per Franzén, CEO and Managing Partner
Outlook
Blackstone
“Looking forward, importantly, we believe the
dealmaking pause is behind us…The environment we see
emerging of lower short-term interest rates, less uncertainty, and
continued economic growth, combined with a pent-up desire to
transact, is the right recipe to reignite M&A and IPO
activity. For Blackstone, we have the largest
forward IPO pipeline since 2021. These trends should be
very favorable for dispositions exiting this year and into
next year.”
– Jon Gray, President and COO
Ares
“With the potential for lower short-term rates in the US
and lower rates already reflected in Europe, coupled with record
amounts of private equity dry powder, we’re optimistic
that transaction activity could accelerate further in the
second half of the year. For example, our global pipeline
of investment opportunities across all of our investment groups and
strategies is at the highest level in over a
year.”
– Michael Arougheti, Co-Founder, CEO, and Director
A Look Ahead
Fall IPO window: Several high-profile IPOs are
in the pipeline heading into the post-Labor Day fall listing
window, including PE-backed companies. Strong sentiment toward the
US IPO market is expected to continue through the remainder of 2025
and into 2026.
Ongoing liquidity crunch: The PE
industry’s liquidity bottleneck will likely continue to play
out over the next several years.
Hugh MacArthur, Global Private Equity Practice Chairman at Bain
& Co., commented on this challenge: “We’re talking
about a 5+ year problem as the GFC was, in order to process all of
this liquidity. This is not going to go away in 2025 or 2026.
It’s going to be continued pressure on the institutional LPs
for liquidity over the course of the next several years.”
Wealth / 401k: The August executive order
calling for expanded access to private equity for 401(k) plans and
participants has compounded on ongoing industry initiatives to
increase private wealth offerings and grow retail investor
exposure.
Firms are seeing growth in fund offerings across asset classes,
particularly credit, private equity, and infrastructure funds.
Industry consolidation: Executives at large PE
firms anticipate a wave of industry consolidation, with scale and
product breadth allowing big players to dominate as smaller firms
risk being squeezed out.
Consolidation may also play out inorganically through
acquisitions, as asset management M&A accelerates, and LPs show
strong appetite for GP stakes strategies.
Regional preference: Several PE firms
including Apollo, CVC, and KKR are optimistic about opportunities
in Europe.
Europe is boasting attractive underlying deal economics. The
lower base rates and spreads in Europe are facilitating access to
cheaper and higher levels of debt financing. Buyout multiples in
Europe also remain more attractive than in the U.S.
A recent Preqin survey on investor sentiment showed Western
Europe attracting the most investor interest over the last six
months, seeing a 12-ppt jump in the proportion of respondents
citing it among markets offering the best opportunities.
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