Private equity – dynamic deal environment

Private equity deal makers also faced a year of fluctuating momentum in 2025. The U.S. “liberation day” tariff announcements froze sentiment and pushed many Q2 transactions onto the back burner. Activity then revived in the second half of the year, as we saw some blockbuster buyouts and a clear rise in the number of exits taking place (including trade sales and IPOs).

The conditions for this trajectory to continue into 2026 are all present – trade tensions have cooled (for now), and macroeconomic conditions are more stable (with interest rates forecasted to decline in both the U.S. and Europe). Crucially, liquidity remains the most significant issue for sponsors, and the pressure from Limited Partners (LPs) to transact and generate distributions is only going to become more urgent as the year progresses. In the absence of any significant global crises, this should translate into more exits, across a range of different pathways which we explore in this publication.

The PE deal arena

After a period of adjustment following the U.S. tariff announcements, deal activity in the European PE market recovered in Q3 2025. Deal count increased by around 11.3% year-on-year, while the aggregate value of PE deals rose by approximately 15.2% over the same period. This was driven by “big ticket” transactions, which accounted for around a third of total deal value across Europe.

2025 witnessed the largest ever leveraged buyout on record: the $55 billion takeover of Electronic Arts by a consortium comprising Silver Lake, Saudi Arabia Public Investment Fund and Affinity Partners. We also saw some significant carve-outs, including Advent’s $4.8 billion acquisition of Reckitt Benckiser’s Essential Home business. Sponsors also remained active in the P2P space, participating in many of the year’s competitive bids (including KKR’s £4.2 billion acquisition of Spectris, following a bidding war with Advent). The year also featured a steady stream of mid-market deals, dominated by bolt-ons and platform build-outs.

Several trends emerged:

First, transactions tended to be heavily structured and subject to extensive negotiation with multiple parties. Co-investments and partnership deals became more prevalent, allowing sponsors to plug the equity gap where leverage was constrained or more expensive. Structured equity and minority investments also featured heavily, the latter providing liquidity to sellers without requiring full exits to be implemented at a perceived undervalue.
Second, we saw increasing focus on industries which are more resilient to macroeconomic uncertainty and less correlated to traditional business cycles, such as healthcare, financial services, defence and infrastructure. This was accompanied by continued interest in more dynamic sectors such as tech, fuelled by AI and data centre growth.
Finally, fundamental value creation was an increasingly essential imperative, resulting in a focus on attractive assets which offer opportunities for growth and are capable of generating sustainable, organic value.

Exits and different pathways to liquidity

In Europe, exit activity also began to recover from Q3 2025. The year ended with reasonable growth in exit volume compared to 2024, with the number of exits up by around 8%, while the aggregate value of exits increased by around 9.2%. The UK performed particularly well, accounting for 28% of exit activity across the region, with the aggregate value of exits increasing by around 47% from the first half to the second half of the year.

Sponsors accessed a number of different routes to liquidity:

Sponsor to sponsor transactions: deals between sponsors (or sponsor-backed companies) remained an important tool. The UK saw several significant transactions, including the £5.7 billion sale of Pension Insurance Corporation (PIC) by a consortium of sellers (Reinet, ADIA, CVC and HPS) to Apollo-backed Athora.

Sales to strategics and trade buyers: alongside deals within the private capital ecosystem, there was a resurgence of interest from strategics and trade buyers. High profile transactions such as GTCR’s sale of its Worldpay stake to Global Payments for USD 24.25 billion and the sale by Lone Star of its majority stake in EUR 6.4 billion Novobanco to Groupe BPCE are good examples.

Alternative liquidity routes: alternative exit routes are now firmly established in the market, and are no longer seen as a niche or cyclical tool. In particular, General Partner (GP)-led secondaries, or CV (continuation vehicle) transactions, delivered around 20% of exit value for sponsors in 2025. Key trends included both an increase in ticket sizes for CV deals implemented by large-cap sponsors, as well as the entry of more mid-market PE houses into the CV market (e.g. Inflexion’s £2.3 billion continuation fund which closed in May 2025, moving four mature portfolios from older funds into the new structure).

IPOs: the UK IPO market has been relatively subdued over the last few years, with only a trickle of PE-backed listings. The £1.92 billion Shawbrook IPO was a notable exception in 2025, marking a return to the public markets for the bank after it was taken private in 2017, and generating liquidity for both Pollen Street and BC Partners. This was accompanied by a handful of sponsor-backed IPOs across Europe (including the €13.7 billion IPO of Verisure) and a pronounced increase in US IPO activity.

Outlook for 2026

With market conditions improving and valuations stabilising, we anticipate that sponsors will move forward with a variety of exit strategies in 2026. Despite the increase in activity in Q3 and Q4 of 2025, there remains an ever-growing roster of PE-backed companies which need to be sold (in the UK, this number has grown from 1,700 to 2,700 over the last decade, for example), with average hold periods for sponsors at just shy of 6 years. Over the past few years, this backlog has stalled distributions to LPs, reducing liquidity available for deployment into new funds and dampening the fundraising environment.

The imperative to transact in 2026 is therefore very real. While industry participants anticipate that sponsor-to-sponsor exits will continue to dominate, we also expect to see: