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Three key takeaways from the fourth quarter and full year 2025:
- Deals are accelerating due to lower financing costs and stronger public markets.
- Exits are improving, but the backlog and aging inventory remains a structural overhang.
- Fundraising remains constrained and increasingly concentrated in the largest managers.
The outlook is increasingly constructive, but execution discipline remains essential.
Private equity deal activity
The momentum in the US private equity (PE) market continues to build as it enters 2026. Deal values finished the year on a high note, delivering the best performance since 2021. Through 2025, deal value witnessed a growth of 61% compared with last year. Federal Reserve rate cuts resulting in spreads at their multiyear lows along with the correction in the valuation closing buyer-seller expectation gap culminated in a favorable deal environment. PitchBook expects platform leveraged buyouts (LBOs) to rise to approximately 25% or more of total PE deal activity in 2026, supported by more than US$1 trillion of US dry powder and improving market clarity.
Source: PE Pulse survey 4Q25.
Source: PE Pulse survey 4Q25
Technology and consumer remain the preferred sectors, as sponsors back operationally resilient businesses amid tariff pressure and supply chain shifts. Technology is preferred because it’s typically asset light and less exposed to tariffs and logistics shocks, with recurring revenues that make cash flows more predictable and resilient. Consumer remains favored because demand — especially for staples and trusted brands — tends to hold up in downturns, and leading companies can pass through costs and rework sourcing faster than weaker competitors.
Source: PE Pulse survey 4Q25.
Tailwinds prompting dealmaking in 4Q25 are expected to continue to boost the activity in 2026, with more than 80% of PE Pulse survey participants expecting an increase. Additionally, US regulatory policy changes (SEC oversight, antitrust enforcement, tax policy) could potentially augment deal activity — with 52% of survey respondents expecting some degree of increase due to this. LBOs are expected to account for 25% of deal activity in 2026, higher than 2025 (21.6%) and moving closer to the pre-pandemic average of 28.5%, underpinned by an improved financing environment.
Source: PE Pulse survey 4Q25.
Exits market overview
Exit values surged 54% in 4Q25 compared with the prior quarter, driven by a sharp concentration of large transactions — namely, the year’s largest IPO (raising more than US$6b) and three mega exits exceeding US$5b each.
More broadly, 2025 marked a clear step up in exit activity: Total exit value reached US$358b, up from US$227b in 2024. Narrowing valuation gaps and a more supportive lending backdrop helped unlock this improvement.
While exit values appear to be improving, firms need more realizations to drive distributions. About 22% of the approximate 13,000 portcos are seven or more years old, and another 32% are aged between four and seven years.
Source: PE Pulse survey 4Q25.
Note: 2025* data is through 31 October 2025.
Source: PE Pulse survey 4Q25.
Heading into 2026, sentiment is decisively constructive as more than 70% of PE Pulse survey respondents expect exit activity to improve over the next six months.
Strategic sales are viewed as the most viable route (approximately 80% of respondents rate them 4 or 5 in importance), with sponsor-to-sponsor transactions close behind (approximately 70% rate them 4 or 5). At the same time, continuation vehicles, after a strong run in 2025, are expected to remain moderate in 2026 as investors anticipate a broader reopening of traditional exit pathways, specifically IPOs.
Source: PE Pulse survey 4Q25.
Fundraising activity and trends
Fundraising has struggled largely because exits haven’t picked up enough to meaningfully boost distributions, making it harder for general partners (GPs) to raise new capital. While the fourth quarter is usually the busiest period for fund closings, 4Q25 was an exception. Fundraising value fell 25% in 4Q vs. 3Q and 47% year over year, making it the weakest quarter since 3Q20 (pandemic period).
For 2025, the level of funds raised was down 27%, and the number of funds was down 50%. Furthermore, limited partnerships (LPs) narrowed their manager rosters and concentrated commitments in larger, more established firms. PitchBook reports that through September 2025, nearly half (46%) of total fund value went to the top 10 funds — the highest share in the past decade. Fundraising is not closed but selective.
Source: PE Pulse survey 4Q25.
Entering 2026, sentiment is improving, as 55% of PE Pulse survey respondents expect LP commitments to increase. Some LPs also see new capital channels emerging, particularly through stablecoins and fund tokenization, enabled by reforms under the GENIUS Act. Around a third of US-based respondents (38%) believe that tokenized LP interests could broaden the investor base, while global participants are more optimistic, with nearly half (46%) expecting tokenization to expand the investor base.
Looking ahead, GPs are encouraged by the prospect of lower rates and a rebound in deal flow and exits. Still, LP pressure for distributions and a tough fundraising market remain concerns. In this environment, performance will come from discipline: being selective, underwriting carefully and driving value creation. With valuations reset, the next few quarters could offer some of the best opportunities in recent years.
Source: PE Pulse survey 4Q25.
Amar C. Mehta and Shrey Tripathi coauthored this article.
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