According to a recent report by Bain & Company titled "Global Private Equity Market 2026," the global private equity market is demonstrating a strengthening recovery following a rebound in deal activity during 2025. Both merger and acquisition investment transactions and exit deal values surged, reaching the second-highest level in history. This recovery marks a critical turning point for the industry after a period of relative stagnation over the previous three years, laying a solid foundation for sustained growth in 2026 and beyond.
Bain notes that while the market outlook remains positive, the increasingly mature private equity sector now stands at a pivotal juncture. Funds are facing intensified capital competition and higher return expectations from investors, while also confronting multiple structural industry challenges. The report reveals that despite a substantial increase in exit values last year, the cash returned to limited partners (LPs) still fell short of expectations, constraining the sector's recovery. A key metric—the proportion of cash distributed to LPs as a percentage of net asset value (NAV)—has remained below 15% for four consecutive years, setting a record low for the industry.
The industry's liquidity bottleneck is prominent, with an estimated 32,000 unsold companies currently backlogged, valued at approximately $3.8 trillion. The average holding period for exits has extended to about seven years, up from the five-to-six-year average between 2010 and 2021. This delay in cash distributions to LPs has become a primary reason for the slow and difficult fundraising efforts of many funds.
Despite structural challenges and economic uncertainties, the report highlights that last year’s historically large M&A transactions significantly contributed to the industry's rebound. Strong deal-making appetite among general partners (GPs), $1.3 trillion in dry powder awaiting investment, and declining interest rates collectively catalyzed a robust recovery in both deal and exit market volumes. This has gradually restored confidence in the M&A credit market: global M&A deal value (excluding add-on acquisitions) jumped 44% year-over-year in 2025, reaching $904 billion. The privatization of Electronic Arts (EA) for a total of $56.6 billion set a new record as the largest M&A transaction in history.
Exit activity also rebounded strongly, with global M&A-related exit values rising 47% year-over-year to $717 billion. Notable exits included Macquarie's sale of Aligned Data Centers to BlackRock for $40 billion, as well as several deals led by technology consortia eager to expand their AI data processing capabilities.
Although both M&A and exit values in 2025 reached the second-highest levels on record—only slightly below the peak year of 2021—and included the largest transaction ever, Bain's report indicates that the recovery was limited rather than broad-based. Only 13 mega-deals exceeding $10 billion accounted for 30% ($274 billion) of the global total, with 11 of those concentrated in the United States.
The report provides an in-depth analysis of new industry dynamics reshaping the GP operating environment, factors that have made the private equity business model more complex compared to the "golden decade" of the 2010s. During that period, private equity benefited from ultra-low interest rates, steadily rising valuation multiples, and abundant capital. In contrast, the new normal features higher interest rates, stubborn valuations, slower exit cycles, and more discerning investors.
Leading funds are building competitive moats through scale, specialized expertise, technology and artificial intelligence, and more professional fundraising approaches, leading to rising industry costs. The report highlights a clear division between the first and second halves of 2025, with a new wave of private equity growth driven largely by mega-deals.
Investor optimism improved early in the year but was temporarily shaken by U.S. government tariff policy disruptions. However, from the third quarter onward, deal activity rebounded strongly, resulting in the strongest quarter on record with $301 billion in transaction value. For the full year, total deal value approached historic highs, and the average disclosed deal size hit a record $1.2 billion, although the number of M&A deals fell 6% to 3,018.
The surge in total deal value was propelled by a wave of mega-transactions. In addition to the $56.6 billion EA privatization and the $40 billion Aligned Data Centers deal, other significant transactions included the $27.5 billion acquisition of aircraft leasing platform Air Lease and the $23.7 billion buyout of retail pharmacy chain Walgreens Boots Alliance.
Bain also points out that the impact of these mega-deals on the $1.3 trillion dry powder reserve remains limited, as equity for many of these transactions came mainly from sovereign wealth funds and strategic buyers rather than private equity funds. Given the wide range of non-buyout capital sources, the amount of capital chasing deals is unprecedented, which has reduced the share of private equity in transactions.
Excluding deals above $10 billion, mid-market and small-cap deal activity in 2025 better reflects the overall state of the M&A investment market. Deal values in the $5 billion to $10 billion range increased 6% year-over-year, while those between $1 billion and $5 billion grew 29%, resulting in overall growth of 16%. North America was the largest engine of growth, contributing 80% of the increase in deal value. Excluding mega-deals over $10 billion, Europe also made significant contributions.
Most sectors saw rising deal values, though deal counts generally lagged. Public-to-private transactions continued to dominate the large-deal segment, accounting for roughly half of the growth in deal value. GPs, along with their sovereign wealth fund and corporate investor partners, leveraged improved U.S. M&A financing conditions and post-privatization restructuring opportunities to drive these deals.
The rebound in exits alleviated some of the industry's long-standing liquidity constraints, helping meet LPs' demands for cash returns. Economic recovery, shifting business needs, and the rise of artificial intelligence collectively fueled a global M&A boom, supporting the rebound in exit activity. However, Bain notes that just seven exits valued over $10 billion contributed $155 billion (22%) of the total exit value, while the number of exits declined slightly by 2% to 1,570, roughly returning to pre-pandemic levels.
Although overall exit activity was relatively moderate compared to mega-exits, exits below $10 billion still grew 34%, as opportunistic buyers sought portfolio assets to meet strategic corporate needs. Exits to strategic buyers surged 66% year-over-year, with even larger increases in North America (73%) and Europe (82%). Examples include ECP's sale of power producer Calpine to its competitor Constellation for $29.4 billion.
Secondary transfers between financial investors grew at a slower pace, increasing 21% globally, partly due to the Aligned Data Centers transaction. Without that deal, secondary exit values in North America would have fallen 19%. In Europe, seller exits grew a robust 56%. The number of IPO exits globally increased 36%, but the scale remains small, as GPs often avoid IPO exits due to complexity and macroeconomic volatility risks. The report suggests that the reopening of the IPO window may boost exit activity in 2026.
Amid ongoing liquidity concerns, exit channels via secondary markets and continuation vehicles (CVs) continued to expand. GP- and LP-led secondary transaction values grew 41% year-over-year. GP-led continuation fund activity rose 62%, with an average annual growth rate of 37% since 2022. Although these still account for less than 10% of total exit value, GP interest is clearly increasing. In a recent survey by StepStone and Bain, about one-quarter of respondents had participated in a continuation fund in the past two years, and roughly 40% plan to explore such transactions in the next 12 to 24 months, with more than half citing liquidity release as the primary motivation.
Overall, net cash flow in the private equity sector last year was slightly above breakeven, but the ratio of cash distributed to LPs as a percentage of NAV remained at 14%, the lowest level since the 2008–09 global financial crisis. The report warns that liquidity challenges remain severe.
Fundraising declined for the fourth consecutive year, reflecting increasingly fierce capital competition. Persistent low cash returns to investors over four years led to continued fundraising contraction in 2025. The report shows that total private capital fundraising reached approximately $1.3 trillion last year, flat compared to 2024, largely due to strong growth in infrastructure funds. However, buyout funds—the largest category—saw fundraising drop 16% to $395 billion. The total number of fund closings fell 18%, with buyout fund closings down 23%, marking the fourth straight year of decline across nearly all fund categories.
Bain observes that although most LPs still plan to maintain or increase their private equity allocations, limited cash returns from older funds have constrained their ability to commit new capital. This has accelerated the trend of LPs concentrating their investments in the largest, top-performing GPs, with investors demanding higher returns and consistent cash distributions. As a result, Bain believes these trends compel GPs to articulate differentiated fund strategies while improving communication with investor relations teams.
Despite growing competitive pressures, the report emphasizes that private equity remains highly attractive to investors. The top quartile of buyout funds have consistently outperformed public market averages across all time horizons. The report also highlights that, in an environment of high concentration in U.S. equity markets, private equity offers investors more diversified exposure across industries and company sizes, representing a significant advantage.
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