As we move further into 2025, the private equity landscape continues its transformation following a period of recalibration. The industry has weathered significant challenges over the past few years, navigating through economic uncertainty, rising interest rates, and geopolitical tensions. Despite these headwinds, private equity has demonstrated remarkable resilience, and we're beginning to see encouraging signs of recovery and adaptation to a new market reality.
The data from Bain & Company's 2025 Global Private Equity Report offers valuable insights into where we've been and where we're headed. While the industry has yet to return to the heights of 2021, there are clear indications that private equity is finding its footing in what appears to be a "new normal" of more disciplined investing, portfolio management, and strategic value creation.
2024 in Review: Insights from Bain & Company’s Global Private Equity Report
As we reflect on 2024, Bain & Company’s latest report provides a comprehensive view of the private equity landscape, highlighting both recovery and continued challenges. Global dealmaking showed signs of resilience, with an uptick in activity following a subdued 2023 . Meanwhile, global buyout assets under management (AUM) continued their steady climb, reinforcing the long-term expansion of the industry.
Exit Activity Rebounds Amid Lingering Challenges
One of the most encouraging signs of market momentum in 2024 was the rebound in exit activity. Both the number of deals and global buyout exit values saw year-over-year increases, signaling renewed confidence among investors and strategic buyers. This resurgence in liquidity is a positive development, particularly after a challenging period of sluggish exits in 2022 and 2023. However, Bain’s report underscores an important caveat: "With the exception of a spike in 2021, the amount of capital returned to investors is not keeping pace with the industry’s increasing scale. While global buyout AUM has tripled over the past decade, distributions as a percentage of NAV have fallen from an average of 29% from 2014 to 2017 to 11% today." This suggests that while exit activity is improving, the pace of capital recycling remains a concern for limited partners (LPs).
Deal Value Climbs as Multiples Increase Slightly
The private equity market also saw a significant increase in global buyout deal value in 2024. North American deal value surged by 23%, while Europe recorded an even more impressive 28% increase in total deal value. Larger deals, particularly those in the $2.5 billion to $10 billion range, continued to account for a growing share of total deal value in both regions.
Multiples across sectors held firm, with the overall market seeing an increase to 11.9x EBITDA year over year. However, technology sector valuations experienced a slight decline. While this moderation in tech multiples could reflect a more disciplined approach to pricing, it also underscores shifting investor sentiment toward more balanced portfolio allocations beyond high-growth sectors.
Fundraising Pressures Mount as LPs Seek Liquidity
Despite a stronger deal-making environment, fundraising remains a challenge. LPs face mounting pressures due to the prolonged distribution slowdown, making capital commitments more selective. Both general partners (GPs) and LPs recognize that the most significant risks to returns are an uncertain exit environment and persistently elevated asset multiples. These concerns have forced GPs to get more creative in managing portfolio liquidity and structuring exits that maximize value while balancing LP expectations.
Frank Scarpelli, Managing Partner at Sparc Partners, a Private Capital Advisory firm, reflects on the challenges outlined in Bain's report:
“With LPs facing reduced distributions as a percentage of NAV, GPs need to demonstrate more than investment acumen. They must show a clear path to operational efficiency and value creation within their portfolios. The ability to execute in areas like talent optimization and technology integration, without building costly internal infrastructure, becomes critical. This strategic approach can significantly enhance a GP's appeal to discerning LPs.”
Looking ahead, private equity firms will need to navigate an environment where opportunities for exits are improving but capital flows remain constrained. The resilience of dealmaking and the gradual return of exit activity offer optimism, but the industry must address the structural change and capital deployment.
Artificial intelligence will emerge as a significant force in the private equity landscape in 2025.PE firms are rapidly adopting AI tools to enhance deal sourcing, due diligence, and portfolio management processes, with implementation resulting in meaningful efficiency gains. As Bain notes in their report, "The firms having the most success mining value tend to share a similar outlook: They've become true believers in generative AI's potential and are committed to managing decisively through this period of change and ambiguity."
The most successful private equity firms are developing specialized expertise to evaluate AI capabilities and implementation potential, particularly in sectors where AI drives transformation, including healthcare diagnostics, financial services, and enterprise software.
As we progress through 2025, several factors suggest a more robust recovery for private equity in the months ahead. The gradual normalization of interest rates, with central banks beginning their easing cycles, is providing more clarity on financing costs and helping to narrow the bid-ask spread that has hampered deal activity. Dry powder remains at historic highs, with an estimated $1.2 trillion allocated specifically to buyouts waiting to be deployed.
The exit backlog that has built up over the past few years is creating pressure for realizations, which we expect to accelerate in the second half of 2025. This should provide distributions to limited partners, potentially unlocking more capital for new commitments. We're already seeing early signs of this virtuous cycle taking hold.
Fundraising shows early recovery indicators, particularly for specialized strategies and sector-focused funds that can articulate a clear value proposition. While mega-funds continue to face headwinds, the middle market is seeing increased activity as investors seek more focused strategies with more precise paths to outperformance.
Innovation in deal structures and financing also provides a cause for optimism. Private equity firms increasingly utilize minority stakes, structured equity, and private credit solutions to overcome transaction hurdles. The convergence of private equity and private credit strategies creates new opportunities for flexible capital deployment that can adapt to market conditions.
Mr. Scarpelli, noting the optimism for 2025 detailed in Bain's report, adds:
“'While the high levels of dry powder are encouraging, the real advantage lies in how that capital is deployed. GPs who can efficiently leverage specialized resources for operational enhancements, AI integration, and leadership development will be best positioned to capitalize on the emerging opportunities. This strategic access to expertise, rather than building it internally, can be a significant differentiator and drive superior returns in the coming year."
As we navigate the remainder of 2025, several considerations stand out for private equity professionals:
1. Cultivate resilience amid policy shifts and market uncertainty. The new administration's economic policies, particularly around tariffs and international trade, are introducing additional variables into an already complex landscape. Firms that build robust scenario planning capabilities and maintain flexibility in their strategic approaches will be better positioned to weather potential disruptions. Create portfolios and strategies that can withstand various economic outcomes while remaining opportunistic when dislocations create attractive entry points.
2. Capitalize on the building momentum from 2024. Deal activity shows clear signs of revival, with exit values and overall deal value increasing. This positive trajectory will continue through 2025 as market participants adjust to the new normal. The firms that will excel can efficiently execute on this momentum while maintaining disciplined underwriting standards. Be prepared to move decisively when opportunities arise, but avoid the temptation to chase deals at unsustainable valuations simply to deploy capital.
3. Elevate operational efficiency to the forefront of value creation. With compressed multiples and higher financing costs, operational improvements have become the primary driver of returns. Strategic partnerships with specialized operators and consultants can help address specific challenges within portfolio companies. Meanwhile, AI implementation offers significant efficiency opportunities, though firms must balance innovation with appropriate risk management, particularly around cybersecurity vulnerabilities that new technologies may introduce. The most successful firms are creating systematic approaches to operational value creation that can be replicated across their portfolios.
4. Position for the fundraising renaissance on the horizon. As deal activity accelerates and exits materialize, more capital will flow back to limited partners, potentially unlocking the fundraising logjam that has persisted in recent years. While fundraising remains challenging today, forward-thinking firms are already laying the groundwork for their next vehicles by strengthening LP relationships and articulating distinctive investment theses. The fundraising environment may remain selective, but firms with demonstrable track records and clear differentiation will find receptive capital partners as the cycle progresses.
As the private equity industry continues its evolution, one thing remains clear: despite the challenges of recent years, the asset class continues to demonstrate its adaptability and resilience. Those firms that can navigate the complexities of the current environment while maintaining a long-term perspective will likely emerge stronger, continuing to deliver value for investors and portfolio companies alike.
