This article is part of Bain’s 2026 Global Private Equity Report

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Overview

After three years in the relative doldrums, private equity finally started to build some momentum in 2025. The gains were mixed and propelled by a narrow swath of headline deals. But the industry’s recovery appears to be gaining traction as more general partners (GPs) shake off economic uncertainty and valuation qualms to put more money to work and speed up distributions to investors (see Figure 1).

Figure 1

Those totals were the second best in the industry’s history and not far behind private equity’s all-time zenith year in 2021. Dealmakers managed to find a way around tariff shocks in the spring, persistent geopolitical turmoil throughout the year, and lingering uncertainty about everything from interest rates to economic growth. The urge to put money to work produced some of the industry’s biggest transactions ever. The $56.6 billion take-private transaction for Electronic Arts was the largest buyout in history.

If you’re wondering why champagne corks aren’t popping across the industry, it’s because there’s still plenty of work to do. As impressive as those headline numbers are, the activity was concentrated and didn’t contribute much to solving some of the buyout industry’s most stubborn challenges—at least not yet (see Figure 2).

Figure 2

It’s also true that those 13 megabuyouts punched well below their weight in terms of paring down the industry’s growing mountain of unspent capital. That’s because sovereign wealth funds (SWFs) and large corporations directly supplied the largest portion of capital for many of those deals, meaning buyout dry powder was a relatively small slice of the total.

The surge in exit value is certainly welcome in terms of addressing the industry’s persistent liquidity conundrum. But that capital will take time to work through the system. For now, the amount of cash flowing back to limited partners (LPs) continues to disappoint. Distributions as a percentage of net asset value (NAV) have now held below 15% for four years running—an industry record. And with the average holding period for assets at exit floating around seven years, the industry is still sitting on 32,000 unsold companies worth $3.8 trillion.

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Many GPs appear to be holding assets for longer in order to buy time for strategies to increase EBITDA (earnings before interest, taxes, depreciation, and amortization). But that eventually comes at a cost. An analysis of returns from 15 years of buyout vintages (2000–15) shows that internal rate of return (IRR) starts to stagnate around year seven and declines after that.

The growing popularity of liquidity mechanisms like continuation vehicles can ease some of the pressure GPs feel to monetize assets that aren’t ready for prime time. But these mechanisms, which account for less than 10% of exit value today, are a partial fix, not a long-term solution to the industry’s liquidity crunch.

Where all of these structural issues come home to roost, of course, is fund-raising, which remains challenging for many funds (see Figure 3).

Figure 3

Within buyout, there were clear winners. The funds closing the fastest tended to be established funds with a history of both top-tier returns and strong distributions to paid-in capital (DPI). Looking at buyout funds broadly, however, closing a new fund in 2025 continued to be a slow and difficult slog.

What these dynamics highlight is how challenging it has become to execute on the private equity business model in an industry that’s significantly more complex than it was even 10 years ago. Mostly gone are the tailwinds that propelled the broad industry forward in the wake of the global financial crisis: rock-bottom interest rates, steadily rising multiples, and easier access to investors. The baseline now is higher rates, stubbornly high valuations, slower exits, and much choosier LPs. The cost of doing business is also on the rise as the best firms build deep competitive moats through scale, expertise, technology, and professionalized fund-raising organizations.

Against this backdrop, deal math is only getting harder, and GPs face a growing imperative to move assets in and out of portfolios ever more efficiently. As we discuss more fully in Section 2 of this report, the industry has reached an inflection point—a level of maturity that eventually comes to any business, where the basis of competition intensifies and customers (in this case, investors) demand a much higher degree of excellence. Investors more than ever are focused on funds that have a clear, repeatable, and easily explained strategy for producing top-tier results and returning capital on time. And in the coming years, that kind of performance will rely on a firm’s ability to rapidly generate strong EBITDA growth at its portfolio companies—full stop.

The good news is that 2026 is shaping up as promising. Black swan events have come in flocks over the last few years, making forecasts especially perilous. But barring another jolt to the system, the conditions supporting more deal and exit activity appear to be improving.

Interest rates are moving south, albeit slowly. Deal pipelines are well stocked. The blockbuster Medline initial public offering in December (the largest PE-backed IPO ever, and the largest IPO in four years) appears to be just the first in line for a more robust public offering market. And with stock prices high and the economy robust, the boom in corporate M&A that buttressed exit value in 2025 shows no sign of abating.

The improving environment is boosting GPs’ confidence that exit momentum will build this year, according to the 2026 StepStone/Bain Private Equity GP Survey (see Figure 4).

Figure 4

If history is any guide, private equity will find a new path to growth and strong returns—it always does. This period has presented a series of unique challenges. But there’s no reason to believe we aren’t already on the upswing.

Here’s how activity unfolded in 2025 …

Investments

Private equity dealmakers took yet another body blow in early 2025 but, after regaining their footing in the third quarter, managed to produce one of the industry’s best years ever in terms of deal value.

Benefiting from a handful of massive public-to-private transactions, mostly in the second half, investments climbed sharply to $904 billion, a 44% increase over 2024. The number of deals, however, fell 6% year over year to 3,018 transactions. That pushed average disclosed deal size to an all-time record of $1.2 billion (see Figure 5).

Figure 5

The industry started 2025 with as much optimism as possible given the turbulent nature of the last several years. Dealmaking had gained some steam in 2024 and GPs were eager to put their arsenal of dry powder to work. Credit markets were open, interest rates were trending downward, and inflation appeared under control. Then, April’s “Liberation Day” sparked turmoil over US tariff policy (see Figure 6).

Figure 6

Yet, while the top-line numbers were impressive, the gains were uneven, both in terms of breadth of activity and the amount of dry powder put to work.

Just 13 deals in the $10 billion-plus bracket accounted for $274 billion of the global gain in 2025, and 11 of those were concentrated in the US. The $56.6 billion public-to-private deal for Electronic Arts set a new buyout record, and several other megadeals wowed the markets: data center platform Aligned Data Centers at $40 billion, aircraft leasing platform Air Lease at $27.5 billion, and retail pharmacy chain Walgreens Boots Alliance at $23.7 billion.

The numbers were huge but the impact on buyout dry powder, not so much. In many of these deals, the bulk of the equity came from external sources—massive direct investments by sovereign wealth funds and corporate buyers—not buyout funds. Exact figures aren’t available for the EA deal, but The Wall Street Journal reported that, pending regulatory approval, Saudi Arabia’s Public Investment Fund (PIF) will own more than 90% of the equity, with co-owners Silver Lake and Affinity Partners adding only a few billion in capital. Similarly, strategic players Sumitomo Corp. and SMBC Aviation Capital are the new majority owners of Air Lease; Apollo Global Management and Brookfield took minority positions.

Activity below the megadeal threshold was probably more representative of how the traditional buyout segment is doing in this still-spooky macro environment. Excluding the $10 billion-plus segment, deal value grew 16% year over year, with transactions in the $5 billion–$10 billion range growing 6%, while the $1 billion–$5 billion segment grew 29%. North America was by far the biggest contributor to growth during the year, adding 80% to the total. But if you back out deals above $10 billion, Europe’s contribution was comparable (see Figure 7).

Figure 7

Deal value, if not deal count, grew across most sectors (see Figure 8). Public-to-private transactions represented roughly half of total value growth as GPs and their SWF or corporate investing partners took advantage of an improved financing environment for M&A in the US and the opportunity to revamp companies out of the public eye.

Figure 8

One thing is clear as the industry moves into 2026: There is ample incentive and opportunity to give the budding up cycle more breadth, even if challenges to closing deals and generating strong returns remain.

Let’s start with the mountain of available capital. Global dry powder sits at a towering $1.3 trillion, and it’s getting older, with the majority of capital raised in 2022–23 fund vintages (see Figure 9). That exerts plenty of pressure on GPs to put money to work.

Figure 9

For the biggest funds, scale transactions are critical. Yet, as we’ve seen, buyout dry powder isn’t the only capital teed up to do deals. Large GPs are both competing and partnering with capital sources like SWFs or strategic corporations. When you add in this non-buyout capital, the amount of money chasing deals is unprecedented, cutting into private equity’s share of the action.

Looking at the market more broadly, the increasingly favorable interest rate environment is working in buyers’ favor by reducing the cost of debt and raising confidence in the future macro outlook (see Figure 10). The syndicated loan market is open for large, high-quality borrowers. And private credit remains the lender of choice for sub-$1 billion deals.

Figure 10

The biggest question moving into 2026 is the same one that was at the forefront a year ago: Can market conditions stabilize sufficiently to support sustained activity? The recent StepStone/Bain survey of GPs showed that the two most common hurdles to completing deals in 2025 were inflated seller expectations and diligence red flags (poor earnings quality, customer churn, etc.). While these factors have driven a wedge between buyers and sellers since the interest rate shock in 2022, the expectation gap is already narrowing. And it should be less divisive if rates continue to ease and economic conditions get more forgiving.

Deal multiples have grown sharply across industries in recent years, especially in the US. But almost 80% of GPs surveyed believe multiples will stay flat in the coming year (see Figure 11). That should make it a bit easier to buy assets, but they will still be expensive, and if multiples aren’t moving, it takes away a value lever so many deals have relied on over the past decade.

Figure 11

As we discuss in Section 2 of this report, the maturing private equity industry is in a hypercompetitive new era. Economic and market conditions have changed structurally in ways that are significantly less favorable than the conditions that powered the industry’s breakneck growth for almost two decades. Multiple expansion and ultra-cheap debt have waned, leaving GPs with the challenge in 2026 and beyond of generating strong returns despite stubbornly elevated asset prices. The firms that stand out in this difficult new environment will be those that can find or sharpen a repeatable model for sourcing deals, determining early how to create value and executing at speed.

Relying on the same old, same old has never been riskier.

Exits

Given the stubborn liquidity issues that have stacked up across the private equity industry over the past several years, 2025’s strong increase in exit value was a welcome step forward. GPs can thank a global boom in mergers and acquisitions spurred by improved economic conditions, shifting business requirements, and the AI explosion.

Global buyout-backed exit value jumped 47% year over year to $717 billion, led by several landmark exits, including Macquarie’s $40 billion sale of Aligned Data Centers to BlackRock and a consortium of tech giants hungry for AI data-crunching capacity (see Figure 12). Just seven exits valued at over $10 billion each added $155 billion, or 22%, to the global total, ensuring that 2025 marked the second-best year for exits ever (see Figure 13).

Figure 12

Figure 13

Activity was less pronounced across the broader market, but exit value below the $10 billion threshold still grew 34% as opportunistic corporate buyers combed through buyout portfolios looking for solutions to strategic imperatives.

The total number of exit transactions globally backed off slightly to 1,570, a 2% drop year over year, leaving exit count about where it was just before the Covid-19 pandemic. The decline in 2025 can be traced to several “frozen” months in the spring, when tariff turmoil caused buyers and sellers to halt processes while they regrouped and reset valuation assumptions. Exit numbers improved in the year’s second half.

Strategic exits like ECP’s $29.4 billion sale of Calpine to Constellation or GTCR’s $17.6 billion sale of Worldpay to Global Payments dominated activity. The channel grew 66% year over year and expanded in both North America (by 73%) and Europe (by 82%).

The sponsor-to-sponsor channel, meanwhile, was less robust, growing 21% globally and getting a big boost in the US from the Aligned Data Centers deal. Without that one transaction, the value of North American sponsor-to-sponsor exits would have dropped 19%, offsetting strong growth in Europe, where sales to sponsors increased 56% year over year (see Figure 14).

Figure 14

Initial public offerings globally increased by 36% (off a very small base) and continued to be a minor exit route for private equity. Although soaring public equity markets during the year might have opened the door for IPOs, the hassle factor and continued macro turbulence meant few GPs were willing to walk through it. Just two PE-backed IPOs stood out: Hellman & Friedman’s $4.2 billion offering of Sweden’s Verisure and the massive $7.2 billion Medline IPO led by Blackstone, Carlyle, and Hellman & Friedman in the US. The latter exit, coming at year’s end, may signal more momentum for IPOs in 2026.

Amid growing industrywide concern about liquidity, secondaries continued to expand as an exit channel in 2025, with transaction value of GP- and LP-led vehicles growing by 41% year over year. GP-led continuation vehicles (CVs), which allow a fund to return capital to LPs while retaining control of an asset, are growing even faster (62% year over year and 37% annually since 2022). Still, these vehicles account for less than 10% of total PE exit value today (see Figure 15).

Figure 15

Interest in CVs is clearly growing among GPs. A quarter of all respondents to our recent StepStone/Bain survey said they had initiated or completed a CV over the past two years, and around 40% said they planned to explore a transaction over the next 12–24 months. More than half said a primary reason for launching a CV was generating liquidity to cash out LPs, while 42% said securing new capital for M&A was a top reason for monetizing an asset that way (see Figure 16).

What’s clear, however, is that LPs are generally lukewarm on secondaries as a liquidity solution and will usually tolerate only one CV a year at most from their GPs.

Figure 16

Regardless of channel or size, the companies exiting successfully in 2025 tended to be a fund’s “gem” assets—those with strategic relevance or exceptional quality. GPs had a much harder time moving anything with weaker momentum or an uncertain future. 

The stock of unrealized assets has grown to roughly 32,000 companies representing a stunning $3.8 trillion in value. For buyout funds, holding periods at exit are hovering around seven years, up from an average of five to six years from 2010 to 2021. Almost 40% of all companies are now held for more than five years, up from 29% in 2019 (see Figure 17).

Figure 17

The exceptionally large cohort of investments from 2021 and 2022 will likely continue to put upward pressure on average holding periods. The high prices paid for these companies meant generating adequate returns required high levels of EBITDA growth—performance made difficult by the long succession of black swan events over the past several years (Covid impacts, the interest rate spike, tariff concerns). That has stunted exit velocity for older fund vintages stretching back to 2017.

Against this backdrop, the liquidity challenge continues to dog the industry. While exit momentum improved in 2025, that capital won’t flow back to investors immediately, and it will take sustained improvement for LP cash flows to fully recover.

Net cash flow moved modestly above the breakeven line in 2025 (see Figure 18). Yet a better measure of pressure on GPs to generate realized capital is distributions as a percentage of NAV. That metric remained essentially flat at 14%, a level not seen since 2008–09 in the middle of the global financial crisis (see Figure 19). In fact, the situation is even more severe than it was then, given that distributions measured this way have lagged historical averages for four straight years, a new record for the modern private equity industry. 

Figure 18

Figure 19

The root problem can be seen in DPI for recent fund vintages (see Figure 20). Looking at the cohort from 2017 to 2021, GPs have underdelivered vs. historical performance for every vintage.

Figure 20

These liquidity issues don’t extend to every fund, of course, and those that are on schedule in terms of DPI will enjoy a distinct advantage in fund-raising over those that are running late. LPs aren’t monolithic, either, in terms of the liquidity pressures they feel. When asked in the ILPA LP Sentiment Survey 2025–26 Edition to weigh the trade-off between near-term liquidity and longer-term return generation, about two-thirds of respondents leaned toward holding out for an improved multiple on invested capital (MOIC) (see Figure 21).

Figure 21

But there’s a catch: LPs can be patient as long as the fund has, in fact, produced MOIC appreciation to date and has a clear plan for keeping the momentum going in the future—and that’s not easy.

The problem with extended holding periods is that time eats into returns. To an extent, more time means more opportunity to work on boosting a deal’s target MOIC. But looking at a cohort of fund vintages from 2000 to 2015, median total value to paid-in capital (TVPI) at the fund level begins to flatten after year eight (see Figure 22). And IRR, which better reflects the time value of money, starts to fall off even earlier.

Figure 22

The imperative for GPs is to take a hard look at each asset in the portfolio throughout the hold and ask a key question: Is there really more value to be realized here, and what would it take to capture it? If the answer is “the juice isn’t worth the squeeze,” then sell it and move on. If there is more value to be had, then re-underwrite the deal and refresh the value-creation plan to maintain (or regain) momentum. LPs can generally afford to be patient if they see value in waiting. But time is money, and they expect a clear return for their forbearance.

The good news is that improvement in the exit environment will make these decisions easier. And as we’ve noted, all signs point to a stronger environment for dealmaking in the coming year, which should buttress all exit channels. That said, GPs still have their work cut out for them. Paring down those hold times and improving DPI are the only ways to keep the capital flywheel spinning.

Fund-raising

With distributions to investors in drought stage for four years running, it’s no surprise that fund-raising continued to lag in 2025.

Private capital broadly raised $1.3 trillion last year, a level about even with 2024 totals, thanks largely to strong growth from infrastructure funds. But buyout, the industry’s largest category, dropped 16% to $395 billion. And the total number of funds closed during 2025 fell 18% for the industry as a whole and 23% for buyout (see Figures 23 and 24).

Figure 23

Figure 24

There’s no compelling reason to believe that investors are losing faith in private equity. An overwhelming majority of LPs surveyed by Preqin indicate that they plan to either maintain or increase their allocations both in 2026 and over the long term (see Figure 25). There is ample evidence, however, that LPs are stretched to their limit. Simple math dictates that the amount of capital they can commit to private equity today is constrained by the amount they get back from previous investments.

Figure 25

By the end of 2025, 53% of LPs in a Private Equity International survey indicated they are limited in making new commitments to private equity because past commitments have yet to be drawn down (see Figure 26). That’s an increase of 15 percentage points from year-end 2024. LPs are already on the hook for the massive commitments they made in the record 2021–22 fund-raising boom period, and without cash flowing back from aging fund vintages, funding those commitments becomes problematic. Until balance is restored, LPs will have to continue to juggle supply and demand very carefully.

Figure 26

The GPs attracting capital in this period of scarcity are those that have delivered both strong returns and steady distributions. Thoma Bravo, which closed a $24.3 billion flagship fund in 2025, and Bain Capital, which closed a $14 billion fund, are prime examples. Both firms have repeatedly offered fund series that perform above median in terms of IRR and DPI.

None of this is exactly new. LPs have for years gravitated to large, established GPs with consistent performance, as well as funds of any size that can articulate a clear, demonstrable model for generating alpha. What’s changed is that LPs have become significantly more demanding. Increasingly, they are looking for top-quartile returns from recent funds—often more than 20% net IRR for buyout—as well as consistent, top-quartile DPI across funds.

Not only is it critical for a fund to be able to define and articulate a truly differentiated and repeatable strategy, focusing on sector specialization, world-class capabilities, or whatever else separates it from its peers. The most effective firms are also transforming how they communicate that strategy in the marketplace. A professionalized investor relations capability is rapidly becoming table stakes in the buyout world. The best of these look a lot like the commercial organizations that software companies, financial services firms, and other large B2B sellers rely on every day. These organizations define the market clearly and learn what specific LPs want to hear in terms of metrics, coinvestment opportunities, fees, and DPI. They target the right decision makers with well-crafted sales plays and ensure that the right message is getting to the right “customer.” Old-school networking still matters, of course. But lunch and a handshake simply won’t cut it anymore, even for firms that have been around for decades.

What we know from history is that periods of industry stress tend to increase the number of so-called zombie funds, whose weak performance prevents them from raising a new fund, leaving them to slowly wither away. In recent months, a number of high-profile industry voices have suggested publicly that this record period of low DPI relative to net asset value is destined to increase the zombie rate dramatically.

We’re not seeing anything so draconian. There’s always some churn in the industry; in normal periods, roughly 15% of fund series fail to reraise. In times of stress, that number inevitably goes up. During the global financial crisis, for example, the rate increased to around 20%, and it’s no coincidence that liquidity was a sorting factor: The failure rate was much higher for funds in the third and fourth quartile in terms of DPI performance (see Figure 27).

Figure 27

Today, around 70% of the fund series you would expect to reraise have done so. Among the 30% that haven’t, we can expect casualties. But as sponsors scramble for solutions, the period of the global financial crisis is probably a good yardstick for where the long-term failure rate will end up.

None of that is to say, however, that the liquidity crunch isn’t putting the squeeze on a large swath of the industry. If generating DPI hasn’t risen to the top of a fund’s agenda in this environment, leadership is playing with fire.

Returns

As difficult a period as this has been for private equity fund-raising, it’s important to add a little perspective. Buyout funds have still raised $1.8 trillion since 2022 for the simple reason that investors continue to see major value in the asset class.

It’s true that the remarkable run-up in the public markets over the past several years has erased the historical gap in 10-year returns between public and private equity, at least in the US and at least for now (see Figure 28). But LPs recognize that these public market gains are likely anomalous and, most critically, private equity offers the choice of investments with sizable outperformance. Top-quartile buyout funds outperform the public averages by significant amounts over all time horizons (see Figure 29).

Figure 28

Figure 29

It’s also true, of course, that US public equities have become extraordinarily concentrated. You’ve heard it before: Seventeen megacap stocks (the so-called Magnificent Seven plus 10 other tech and nontech giants) accounted for 75% of the S&P 500’s gain in 2025. LPs already have significant exposure to these stocks and have benefited mightily from their performance over the last several years.

What private equity offers is broader diversification across sectors and company sizes, in addition to the opportunity to choose top-tier funds that meet specific allocation objectives. Comparing the S&P 500 and global buyout’s investments in two hot sectors—tech and healthcare—shows just how different the exposure can be (see Figure 30).

Figure 30

Returns, as we’ve seen, are vitally important to how LPs choose among PE funds and remain critical to private equity’s appeal as an asset class. But when asked what they value most in private equity, LPs in Preqin’s June 2025 Investor Outlook Survey said diversification, not returns, is the top rationale for investing (see Figure 31).

Figure 31

The bottom line is this: The private equity value proposition has not lost its appeal among investors during this difficult period. But as the industry matures and becomes increasingly more competitive, LPs are ever more focused on who within the asset class can deliver.

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