Private Equity Pulse

Private Equity Pulse: key takeaways from Q2 2025

7 minute read 29 Jul 2025

Private equity exits reach a three-year high, as firms seize opportunities to turn strategic value creation into realized returns.

In brief

Private equity activity remained active in the first half of the year, with liquidity events reaching their highest levels in the last three years.
Corporate acquirers became active buyers of private equity assets, with sponsors showing flexibility on valuations to help clear long-held portfolio companies.
Firms announced 215 significant exit transactions in the first half of the year worth an aggregate US$308b – the most since the first half of 2022.

Global M&A markets have demonstrated a surprising measure of resilience over the past few months, despite elevated macro volatility and tariff-related uncertainty. Transactors (including both sponsors and corporates) have announced nearly US$2t in global Mergers & Acquisitions deals so far this year, up 30% versus a year ago. Private equity has been an active contributor — while the weeks immediately following the onset of global trade tensions saw many deals paused or pulled, sponsors nonetheless represented 31% of the overall M&A market in the first half of this year, up from just a quarter in the first half of 2024.

In March, our regular survey of private equity general partners (GPs) found nearly three-quarters of firms reported that their risk tolerance was higher than average — a perhaps counterintuitive result given the level of volatility. It’s clear though, that many firms have leaned into the opportunities, particularly for higher-quality assets that might be trading at a relative discount. In aggregate, the number of private equity deals climbed 17% in the first half of the year versus the same period a year ago. Large deals in particular were a significant driver of activity — the value of deals grew more than 40% versus 2024, driven by a range of deals across diverse spaces that included retail, transportation, energy, financial services and infrastructure.

Despite the rise in deployment activity, the market has still experienced pockets of disruption. Since the beginning of April and the uncertainty around tariffs, significant percentages of investors have renegotiated, withdrawn or postponed transactions — 30% of firms reported having to renegotiate deals based on fluctuations in underlying valuation metrics in Q2, and just over a third say their portfolio companies have done the same.

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GPs have spent the last several months working to assess and understand the impacts of tariffs across the portfolio, assessing input costs, supply chains, manufacturing footprints, pricing strategies and other dynamics. While most firms report that they have a reasonable grasp on the impact of tariffs across the portfolio, a significant minority continue to work closely with portfolio companies (portcos) to assess the full breadth of potential impacts.

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As a whole, investors feel comfortable with their positioning. More than three-quarters say they’re more concerned about the second-order impacts of tariffs and trade volatility — including the impact on GDP growth, interest rates, consumer sentiment and other measures — in comparison to the immediate first-order impacts across the portfolio.

As a result, firms expect a measure of acceleration in the coming months. Currently, nearly two-thirds of investors surveyed expect deployment activity to increase over the next six months. Notably the percentage that expect activity to decrease remains low, at just 10% of survey respondents.

Exits improve as sellers adjust expectations

Exits continue to be a top priority for private equity, and despite the volatile environment, firms took advantage of the open windows in the first half of the year to seize opportunities to turn strategic value creation into realized returns, propelling mid-year proceeds to their highest level in three years.

Firms announced 215 significant exit transactions in the first half of the year worth an aggregate US$308b — the most since the first half of 2022. Liquidity was enabled by strategic buyers in particular — while IPOs remained in relative stasis, and secondary buyouts actually declined 9% by volume versus the first half of last year, the quantum of sales to strategics grew 26%, and the value of those deals more than doubled.

Continued pressure from limited partners (LPs) appears to be leading many firms to be increasingly flexible on valuations to clear out longer-held portcos, driving an increasing supply of assets for sale. According to Pitchbook figures, private equity firms have amassed more than 30,000 assets waiting to be monetized, 35% of which have been held in excess of six years — many were acquired at higher valuations and in a lower interest rate environment, and need to be moved toward liquidity as funds reach their maturities. In our survey, 40% of firms said they’d be willing to accept a haircut of 5%-10% against their original underwriting in exchange for immediate liquidity for long-held assets. Another 24% said they’d accept an even greater discount of 10%-20%.

As more assets come to market, effectively articulating the equity story by starting early on preparedness exercises becomes increasingingly critical. In our latest EY Private Equity Exit Readiness Study, it’s clear that firms attribute improved valuations to such initiatives — 93% of private equity professionals reported that exit preparations lead to asset valuation improvements. Because of this, firms are engaging in exit readiness activities early, with close to half beginning preparations 1–2 years prior to exit.

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Fundraising comes into focus

The uptick in exit activity is particularly timely, as investors grow increasingly concerned about the impact on fundraising. When the dealmaking environment became more challenging in the second half of 2022, fundraising had remained somewhat resilient, buoyed by fresh allocations from LPs and a strong runway of distributions in the quarters leading up to the downturn.

With that runway now depleted, gauges of sentiment show a market under significant pressure. For example, when asked nine months ago about their top concerns, GPs cited 1) the ability to deploy capital at pace, 2) the health of existing portcos, and 3) the ability to achieve liquidity as top concerns. Today, it’s fundraising that ranks first, with exits and liquidity right behind.

These challenges are increasingly evident in the data as well. According to Pitchbook figures, through the end of June, firms had closed funds valued at US$223b — on track for a 20% decline versus last year. As such, all eyes will be on realization activity in the coming months to obtain a directional read on capital raising for the balance of the year, and more important, for 2026.

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Summary

In the first half of 2025, private equity exits reached their highest levels in three years. Corporate acquirers became active buyers, and firms showed increased flexibility on valuations to facilitate the sale of long-held assets. Despite ongoing market volatility, global M&A activity rose by 30%, with private equity contributing significantly. Although fundraising challenges exist, many investors remain optimistic and expect increased deployment activity in the coming months. Firms are prioritizing exit readiness and operational enhancements across various sectors, reflecting a proactive approach in a dynamic private equity landscape.

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