Scale or stall inside private equity’s push to consolidate

Concentration in the private equity (PE) market has been a focal point for several months now and is intensifying with no signs of slowing down. In our article “Big gets bigger: How consolidation is reshaping private equity?” published in Agefi back in February 2024, we already began to explore this dynamic shift. Since then, the market has grown even more competitive for private equity firms, and the incentives to form strategic alliances have only been stronger – especially in recent quarters – but what underlying forces are driving this shift?

The facts

The asset management industry is undergoing a profound transformation, marked by a wave of consolidation aimed at building scale, expanding capabilities, and boosting global competitiveness. Over the past few months, several massive merger announcements have reshaped the competitive landscape. Notably, AXA and BNP Paribas¹ have signed a transaction on 1 July 2025. Similarly, Generali engaged  in negotiations to merge their asset management units, with the ambition of creating a new European investment powerhouse. These consolidations are part of a broader industry trend, as firms seek operational efficiency, diversified offerings, and resilience in response to rising regulatory pressures and intensifying competition.

Within this broader movement, private equity has seen a net acceleration in consolidation over recent years. Between 2012 and 2017, the number of global PE acquisitions remained relatively stable, fluctuating between four and 10 deals annually. From 2018 onwards, the pace significantly quickened, reaching a peak of 25 acquisitions in 2021. Although activity dipped slightly to 18 deals in 2022, the upward trajectory continued into 2023 and 2024, with a series of landmark transactions signaling a strategic pivot within the industry. Leading PE firms are increasingly moving beyond organic growth, turning to mergers and acquisitions to scale operations, broaden investment strategies, and better meet the evolving expectations of limited partners (LPs).

Among the most notable transactions:

• TPG’s acquisition of Angelo  Gordon² in May 2023, a decisive move to diversify.
• Blue Owl Capital’s acquisition of Oak Street in October 2021 and Ascentium Group in March 2023, reinforcing its vertical integration across real estate and lending.
• CVC Capital Partners’ acquisition of DIF³ Capital Partners in November 2023, furthering its transformation into a global multi-asset manager.
• EQT’s full integration of Baring Private Equity Asia in January 2023 significantly enhancing its presence in Asia and expanding its global footprint.

Together, these transactions paint a clear picture: private equity firms are no longer simply fund managers, but are evolving into diversified, institutional-scale asset managers. Scale is no longer optional; it has become a core driver of relevance and competitiveness in a maturing and crowded private markets environment.

Besides reaching critical mass as a strategy it is worth noting that some boutique firms are still very successful in their own market and asset class and are expected to continue to grow and attract a relevant LPs population.

Why consolidation is happening in the private markets

• Accessing new markets and mitigating risks: as private markets face increased scrutiny from regulators, asset managers must seek growth opportunities to maintain their market share. Expanding geographically is one way to achieve this, as it allows firms to access new markets, diversify their revenue streams, and mitigate risks associated with over-reliance on a single region. In times of increasing compliance burdens and shrinking margins, firms need to expand to stay competitive, as simply maintaining their current market share may not be sufficient to weather the challenges.
• Spreading risk and unlocking new investment opportunities: in response to mounting pressures, asset managers are diversifying their portfolios across multiple asset classes. Expanding into different asset types, such as private equity, real estate, or alternative investments, allows firms to reduce their reliance on one asset class and spread risk. For instance, Brookfield Asset Management⁴ has strategically diversified its portfolio, moving beyond traditional real estate investments into infrastructure and renewable energy, tapping into sectors with strong growth potential. This strategy enables firms to tap into new investment opportunities and potentially higher returns. Diversification within asset classes helps firms become more resilient to market volatility and better position themselves for long-term growth.
• Economies of scale and increased efficiency: a key driver of consolidation is the pursuit of increased Assets Under Management (AUM). In an environment where compliance and operational costs are rising, larger asset managers benefit from economies of scale. For example, after acquiring competitors, firms like BlackRock and Vanguard have gained significant AUM, which allows them to reduce per-unit costs and negotiate better fees with service providers. By consolidating, smaller firms can pool resources, share expertise, and leverage a larger AUM to reduce operational costs. The larger the AUM, the more attractive a firm becomes to investors, and the better its ability to absorb the rising costs of compliance, HR, and operational requirements.
• Managing rising compliance and operational expenses: the rising costs of compliance and human resources are significant drivers of consolidation. Regulations like the Digital Operational Resilience Act (DORA⁵) in Europe and tax-driven frameworks such as ATAD III and Pillar II⁶ increase the operational burden on asset managers. In turn, firms are faced with higher costs for compliance, often requiring them to delegate tasks to service providers, hire additional consultants, or recruit more staff. To manage these escalating costs, firms are consolidating to gain efficiency, streamline operations, and reduce redundancy. The battle for skilled personnel is also driving this consolidation, as larger firms with more resources are better positioned to attract top talent, further intensifying the competitive landscape.

2025: What is coming now?

The surge in asset under management (AuM) is here to stay and has taken the form of diversification into more profitable and dynamic niches, mostly driven by multi-asset managers. Investment strategies such as infrastructures or private debt have witnessed spectacular acquisition and investments over the past few quarters. In January 2025, BlackRock⁷ acquired Global Infrastructure Partners, with the clear aim of creating a world-class infrastructure. This merger already resulted in remarkable investments announcement – (yet also amid pressure from the White House), as it revealed  its intention to buy many Panama port holdings in a substantial deal.

Infrastructure is not the only niche where asset managers are setting their sights. Private debt is also a very dynamic and profitable strategy. In fact, according to a report from Preqin, the global private debt market saw a 15% growth in 2024, surpassing USD 1 trillion in assets. BlackRock,⁸ once again, made headlines with its acquisition of HPS Investment Partners. This deal allows BlackRock to create a USD 220 billion AuM heavy franchise in the private debt sector.

Partners Group, in their recent key messages from its capital market day on 12 March 2025). has been just as bullish in stating that its organic growth will be complemented by select acquisitions of other private equity firms. These acquisitions will help extend its offerings and support Partners Group in growing its private equity AuM to over USD 200 billion. More specifically, Steffen Meister, Executive Chairman of the Board at Partners Group, clearly targets an increased focus on its existing extended middle-market-focused private credit business and aims to expand its CLO platform through both organic growth and opportunistic acquisitions.⁹

Conclusion – a new era for private equity?

As the private markets landscape evolves, asset managers must continuously adapt to increasing regulatory constraints, rising operational costs, and margin compression. The response to these challenges has been twofold: consolidation to achieve scale and efficiency, and diversification into high-growth, high-margin asset classes such as infrastructure and private debt.

Furthermore, the growing importance of retail investors as a new source of capital is reshaping fundraising strategies, opening fresh opportunities for firms that are willing to bridge the gap between institutional and individual investors. Larger asset managers are better positioned than smaller boutiques to benefit from this trend toward retailization, as they can leverage their experience and infrastructure in retail distribution.

Ultimately, the industry is entering a new era, one in which size, strategic positioning, and adaptability will be the key differentiators in maintaining competitiveness and profitability.