Executive summary
Deal activity increasing.
Deal activity in Private Equity and Venture Capital has accelerated, driven by narrowing bid-ask spreads, rising public valuations, cheaper debt financing, and strong demand for select sectors and high-quality assets. 2025 activity may surpass all non-2021 years over the past decade, propelled by both opportunity and necessity as record levels of dry powder pressure managers to deploy and liquidity needs push sponsors and companies to transact.
Exit activity showing signs of potential recovery.
Exit volumes are now on track to exceed all non-2021 years within the past decade for best-in-class assets and select sectors. Recent IPOs are broadly seeing market capitalization expansion, while Continuation Vehicles and strategic acquisitions (particularly in Artificial Intelligence and tech adjacencies) increase. Excluding continuation vehicles, sponsor to sponsor transactions are in line with 2023 – 2024 activity levels. Persistent macroeconomic conditions may accelerate exits.
Cost of debt decreasing.
The declining cost of debt may be conducive to investment and exit activity. Should acquisition financing further cheapen through persisting spread compression and lowering base rates, an equity tailwind and credit headwind may occur. Equity segments that are more leverage dependent, such as large-caps, may be disproportionately supported relative to others. Less trafficked lending segments may warrant additional consideration as yields across corporate credits decline.
Venture valuations expanding.
Venture valuations have rebounded, fueled by heightened investor enthusiasm for AI-driven opportunities and select sectors across public and private markets. While a subset of AI startups have demonstrated meaningful growth, the surge in activity has shortened diligence timelines and raises curiosity around the durability of elevated valuations and the authenticity of AI-labeled products and services.
Fundraising remains tepid.
Fundraising is on pace for the lowest recorded levels since 2017, largely due to muted distribution activity. Exposure and dry powder to the asset class remain at historical highs, justifying the pullback in commitments. Furthermore, LPs are increasingly consolidating and re-balancing commitments towards larger, established managers. However, select sub-asset classes (retail-oriented credit products and secondaries) are seeing strength in response to muted equity distributions.
Untraditional methods of generating capital continue to proliferate.
What were previously untraditional financings may be the new normal. Novel mechanisms of generating liquidity and capital across portfolios (e.g., structured capital, continuation vehicles, bridge financing, deferral of purchase and debt payments) and for GPs at the management company level (GP stakes, full ownership sales, NAV loans) are becoming commonplace. Their rise epitomizes the asset class’s evolving sophistication, necessitating further LP examination and expertise.
For more, review our full report on the 2026 Institutional Consulting Private Equity Outlook.
Information and data are as of the date herein and have not been updated to reflect subsequent market conditions.
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