Imagine the private equity landscape as a frozen lake, slowly beginning to thaw. That’s the vibe for 2025. After navigating a period of uncertainty, the market is showing strong signals of a resurgence. The global private equity market is set to experience significant growth, driven by a confluence of factors that are shifting the tides.
The Resurgence of Dealmaking as A Key Driver
A pivotal factor propelling the market forward is the resurgence of dealmaking. As highlighted by McKinsey’s “Global Private Markets Report 2025”, the global PE dealmaking experienced a significant rebound in 2024, surging by 14 percent to $2 trillion. This remarkable surge positions 2024 as the third most active year on record for the asset class by value.
- Benign Financing Environment: The cost of financing buyouts has declined, and the new-issue loan value for PE-backed borrowers has nearly doubled. This favorable financing landscape is a major catalyst for increased deal activity.
- Increased Confidence: Improving financing conditions, spurred by monetary easing, have led to increased entry multiples after a decline in 2023. This boost in confidence is fueling dealmaker enthusiasm.
- Large Buyout Transactions: A notable rebound is evident in large buyout transactions in North America and Europe, with deals exceeding $500 million in enterprise value rising in both value (37 percent) and count (3 percent).
While deal value increased across buyout, growth equity, and venture capital sub-asset classes, it’s important to note that Asia was the only region that experienced a steep decline. This regional nuance underscores the complex, multifaceted nature of the global PE market. However, the overarching trend of rebounding deal activity is undeniable. Building upon this resurgence, several key trends are poised to significantly shape the 2025 private equity landscape.
Trends Shaping 2025
- AI Integration and Infrastructure: The surge in AI adoption is creating massive investment opportunities. Expect to see significant capital flowing into AI infrastructure, including data centers and related technologies. AI integration into PE firm operations, especially in due diligence, is also a growing trend. The need for increased digital infrastructure to support the growth of AI, and cloud computing is creating large investment opportunities.
- Sector Specialization: General partners are increasingly focusing on specialized sectors where they possess deep expertise. This allows them to generate greater value through operational improvements and strategic insights.
- Private Credit Expansion: As mentioned earlier, private credit is becoming a dominant force. Its flexibility and ability to provide tailored financing solutions are driving its growth. And let’s not forget the rise of private debt. BlackRock’s latest report sheds light on the continued expansion of this asset class. With traditional financing becoming more challenging, private debt is stepping in to fill the gap, offering a compelling alternative for borrowers and investors alike.
- Emphasis on Value Creation: In a higher interest rate environment, operational excellence is paramount. PE firms are prioritizing strategies that enhance portfolio company performance and drive sustainable growth.
Of course, no market outlook is complete without acknowledging the challenges. Geopolitical uncertainties, regulatory changes, and the ever-present competition for deals could throw a wrench in the works. But with record levels of dry powder and improving investor confidence, the private equity market is well-positioned to navigate these challenges and seize the opportunities that lie ahead.
In essence, 2025 is shaping up to be a year of resurgence and adaptation for the global private equity market. Those who can navigate the shifting landscape, focus on value creation, and embrace technological advancements will be well-positioned to thrive.
