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Private Equity Pulse

Private Equity Pulse: key takeaways from Q4 2025

Photographic portrait of Pete Witte

7 minute read 04 Feb 2026

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Cautious optimism gives way to tangible momentum and rising sentiment.

In brief

PE activity surged in 2025, with global deal values rising 57%, driven by high-conviction transactions and a record number of mega-deals.
Exit markets recovered as strategic acquirors became more active, lifting exit values more than 50%.
In 2026, sentiment is positive, with general partners (GPs) expecting more acquisitions and exits, backed by disciplined underwriting and confidence in recent deals.

Private equity (PE) entered 2025 with a sense of cautious optimism, which by mid-year started to translate into tangible momentum. After two years of recalibration and disciplined pacing, the transactions market showed its strongest signs of renewed engagement. Deal value rose 57% year-over-year, while deal volume increased a more measured but nonetheless significant 15%, highlighting a familiar pattern wherein sponsors are prioritizing fewer, larger and more conviction-driven opportunities.

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This shift was particularly evident at the top end of the market. The number of mega-deals — transactions valued at US$10b or more — reached 13 during the year, exceeding both the 12 announced in 2021, PE’s prior high-water mark for deployment and the previous peak set in 2006. In aggregate, US$905b of announced deal value made 2025 the second most active year on record by value. While overall deal volumes remained below peak levels, they nonetheless marked the industry’s fourth-busiest year historically, underscoring the depth of re-engagement among sponsors.

Several dynamics helped drive this resurgence. Most notably, the cost of capital stabilized sufficiently for buyers and sellers to realign on pricing expectations, restoring confidence in underwriting and enabling more rigorous scenario analysis. As valuation clarity improved, so too did sponsors’ willingness to transact. At the same time, the broader macroeconomic backdrop became incrementally more supportive, with easing inflation across major economies and resilient labor markets in both developed and emerging regions strengthening baseline assumptions and reinforcing confidence in forward-looking growth.

Private credit, hybrid capital, healthcare and investments related to the energy transition are all high on investors’ agenda for the coming year. But artificial intelligence (AI) enabled business models and especially digital infrastructure plays see the strongest consensus in their attractiveness.

As 2026 kicks off, firms expect continued positive momentum, with narrowing valuation gaps and an increased volume of assets coming to market. This is especially true for PE firms seeking liquidity and greater macro visibility helping to underpin activity.

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All eyes are on exits for 2026

Exit momentum also began to reassert itself in 2025, allowing long-deferred liquidity plans to move forward. This was underpinned by the more constructive macro backdrop, improving financing availability and a recovery in buyer confidence, especially amongst corporate acquirors.

Trade sales, which had been broadly flat through 2023 and much of 2024, inflected sharply higher last year. These were the result of significant pent-up strategic demand and greater conviction at the board level to deploy capital.

In aggregate, PE firms announced US$481b of sales to strategics, representing an increase of 26% by volume and more than 75% by value. Activity was particularly pronounced in sectors where scale, technology and operational capabilities were viewed as critical competitive differentiators. Going forward, GPs expect continued strength in the channel, rating it the most important likely exit route for next year.

Secondaries continued to play a central role in the exit toolkit. Exit values rose from US$77b in 2023 to US$176b in 2024, before reaching US$217b in 2025. With more than US$1.6t in dry powder at the ready, sponsor-to-sponsor deals will remain an important part of the exit playbook.

IPOs remained a challenging exit route for much of the past three years, with repeated market volatility dampening issuance. However, momentum improved meaningfully in the second half of the year, as the value of PE-backed IPOs nearly trebled versus the first six months, to US$38b.

Fundraising sees a marked decline, but many GPs are optimistic for the coming year

While transaction activity moved steadily higher, PE fundraising in 2025 declined sharply, falling approximately 22% year-on-year, underscoring the continued pressure on capital formation despite improved conditions elsewhere in the PE ecosystem. Indeed, dynamics continue to be highly bifurcated. Large, established managers with strong track records, clear sector focus, and demonstrated distributions versus paid-in commitments were still able to raise capital (albeit over longer timeframes), while others saw extended cycles and often smaller fund sizes. Overall, funds closed at an average 19% discount relative to their targets in 2025.

However, as exits continue to recover and distributions resume, fundraising conditions are expected to stabilize, setting the stage for a more balanced capital-raising environment heading into 2026. In our latest survey, 57% of GPs expect conditions to materially improve in the coming year; just 13% expect additional declines.

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Outlook — GPs signal stronger activity ahead

As 2026 unfolds, sentiment continues to strengthen, supported by rising confidence across dealmaking, exits and portfolio performance, even as macroeconomic and geopolitical risks remain in the foreground. Survey data from the fourth quarter points to a clear continuation of elevated expectations for deployment, with 79% of GPs expecting PE acquisitions to increase over the next six months.

Exit expectations have also strengthened materially, with some 73% of PE firms now expecting exit deals to increase over the next six months, up from just 45% a year ago and the highest reading since the survey began more than two years ago. As distributions resume, this recovery in exits should help ease LP liquidity constraints and gradually improve fundraising dynamics, reinforcing a more balanced PE ecosystem.

Most significantly, GPs are signalling confidence in the quality of recent new transactions; 42% of firms expect deals executed in 2025 to outperform those inked during the peak years of 2021-2022, reflecting more disciplined entry pricing, conservative capital structures and a renewed focus on operational value creation. Similarly, 46% believe last year’s deals will outperform those from 2023 and 2024, albeit by a narrower margin, underscoring a steady improvement in underwriting conditions.

While risks remain — 40% of GPs, for example, say the potential for heightened geopolitical tensions could reduce cross-border dealmaking in 2026 — the balance of indicators strongly suggests that PE is entering the year with higher momentum, improved fundamentals and greater conviction in delivering on its commitment to investors.

Summary

Private equity entered 2026 with renewed momentum following a strong rebound in 2025, marked by a 57% rise in deal value and a significant recovery in exits. Strategic buyers and secondaries helped unlock long‑delayed liquidity, while improved macro conditions and stabilized valuations strengthened underwriting confidence. With most GPs expecting increases in both acquisitions and exits over the next six months — and signalling strong conviction in the quality of 2025 vintages — the industry heads into 2026 with clearer visibility, improved fundamentals and growing optimism.

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Photographic portrait of Pete Witte

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