Private equity dealmaking saw modest growth in the first half of 2025, even in the face of geopolitical uncertainty and market volatility. While the volume of private equity deals may not have met some commentators’ optimistic forecasts at the start of the year, the unrelenting pressure for liquidity events, high levels of dry powder and the normalisation of interest rates may lead to growing momentum heading into the second half of 2025 and a landscape in which creative dealmakers find compelling pockets of opportunity.

Acquisitions and Exits

Moderate but robust growth

While private equity deal volume continues to remain below the peak in the pandemic, volume in 2025 is on track to surpass the levels seen in 2022, 2023 and 2024, with the first six months of 2025 reaching nearly USD1 trillion, according to Pitchbook data. Although the number of global deals in the first half of 2025 declined to approximately 7,850 as compared to 9,149 during the same period in 2024, “mega-deals” continue to drive overall rising M&A deal value. Sponsors have been nimble and strategic in structuring larger transactions this year, driven by large deals primarily in the technology, banking and capital markets, and power and utilities industries – such as Thoma Bravo’s USD10.6 billion acquisition of portions of Boeing’s Digital Aviation Solutions business.

Growing pressure for exit options

High levels of dry powder continue to make 2025 ripe for private equity M&A – particularly as more and larger funds approach the end of their life, and financial sponsors face increasing pressure to return money to their limited partners. Globally, private equity exits through June 2025 reached nearly USD550 billion. Despite an increase in exits, the number of private equity funds that are six to nine years old have increased from 3,369 at the end of 2024 to 3,458 as of May 2025. As of June 2025, approximately 54.7% of all active private equity funds globally are six years or older and 25.9% are ten years or older, according to Pitchbook.

Traditional M&A involving strategic acquirers remains a key path to liquidity for sponsors, even though greater creativity and complexity may be needed to get the deal done. For example, in April 2025, GTCR, Global Payments and FIS announced a three-way transaction in which Global Payments will acquire GTCR’s 55% stake and FIS’s 45% stake in Worldpay for USD24.25 billion in cash and stock, and FIS will acquire Global Payments’ Issuer Solutions business.

At the same time, other traditional exit paths, such as IPOs on the New York Stock Exchange or Nasdaq, have slowed over the past few years, with sponsors increasingly looking to alternatives such as sponsor-to-sponsor sales, minority investments and continuation funds, as well as other liquidity events like leveraged dividends and NAV financings. As private equity funds look to optimise the liquidity playbook for investors (as explained further below), one recent survey indicated that more than 60% of limited partners surveyed preferred conventional exits over alternatives such as dividend recapitalisations, even at the expense of lower valuations.

One particularly well-trodden exit strategy is the use of continuation funds, which reached new heights in 2024 when 85 continuation funds raised approximately USD31.1 billion. Continuation funds provide end-of-life funds an avenue for liquidity by giving existing limited partners the choice to either cash out or retain exposure by reinvesting. In 2024, continuation fund exits reportedly accounted for approximately 13% of all sponsor-supported exit volume in 2024, and in the first six months of 2025, sponsors used continuation funds to exit investments worth approximately USD41 billion. Data suggests that in the first quarter of 2025, continuation funds returned a median of 1.4 times the initial investment (net of fees), which is slightly higher than returns for buyout funds. Despite continuing growth in the continuation fund space, Houlihan Lokey data indicates that between 85% and 92% of investors chose to sell rather than remain invested when a portfolio company was sold to a continuation vehicle in 2025, up from 75% to 80% in 2024.

This year in particular has seen an emergence of new, multiple continuation vehicles, otherwise known as “CV-squared” vehicles – compounding concerns of limited partners and others in the industry. While not all assets will warrant a second rollover, a disciplined approach may focus on assets in high-growth areas and/or general partners with strong track records of delivering multiplying returns on assets.

While the newest innovations such as CV-squared remain niche, as exit pressure continues to grow, ageing private equity funds must weigh the risks they are willing to take for new paths to liquidity. In many situations, sponsors may benefit from maintaining optionality and pursuing a multi-track exit path towards an IPO, sale, dividend recapitalisation or other monetisation strategies.

Funds and Fundraising

Fundraising faces headwinds… while dry powder accumulates

Private equity sponsors have faced a relatively lean fundraising environment since the highs of early 2022, as many institutional investors have slowed their investment pace and shifted their focus towards other asset classes. The environment remains challenging both in the United States and globally, influenced by broad market uncertainty resulting from the Trump administration’s “Liberation Day” in early April, no rate cuts from the Federal Reserve, and further delays in the re-emergence of exit opportunities that could have spurred fundraising throughout 2025. Fundraising volumes in the first half of 2025 annualise to approximately USD446 billion, the lowest annual fundraising total since 2018. 2025 is on track to be the third consecutive year of fundraising declines, assuming no pickup in the second half.

In this context, the outlook for the secondary market is optimistic, as sponsors continue to turn to this path for relief from exit pressure, with more than USD100 billion of sales taking place in the first half of 2025 – an increase of almost 50% from the same period in 2024, according to Financial Times. Although a recent Bain report suggests that secondaries still amount to less than 5% of private equity assets under management globally as of early June 2025, recent fundraising momentum (including several instances of secondary groups raising amounts of USD20–30 billion) suggests the role of secondaries in the fundraising market is crystallising as this multi-year trend continues to rise in popularity. In 2024, secondary market deals reached a record USD155 billion, which was 15% higher than the prior 2021 record of USD135 billion.

Capital constraints drive creative financing and deals of scale

In the second half of 2024, we saw an increase in leveraged buyouts as private equity firms acted quickly on interest rate cuts and cheaper financing. Although market participants predicted that early 2025 would bring a boom in private equity M&A, starting in March, the impact of tariffs, inflation and persistently high interest rates created a challenging environment for M&A financing, with leveraged buyout deals dropping 16% in the first half of 2025, according to data from Dealogic. This environment of high interest rates and costs has created pressure on the capital requirements of private equity firms, which have increasingly turned to large-scale, multiparty deals for additional capital.

At the same time, private equity firms are obtaining new financing and leveraging existing financing in new and creative ways.

First, continuing the trend from recent years, private credit lending has continued to thrive, growing to nearly USD2 trillion assets under management in 2024. Private credit has expanded beyond direct commercial lending to a number of areas, including asset-backed financing, real estate debt and other types of financing, and there have been recent high-profile partnerships between private credit lenders and traditional banks. Private credit is a particularly synergistic fit for private equity M&A, including because these lenders provide borrowers certainty in terms (ie, commitments without market “flex”), offer PIK or PIK-like options (including in the form of delayed draw term loan facilities meant to finance future interest expense) for borrowers seeking to manage their liquidity runway after consummating an acquisition and have demonstrated openness to providing credit in circumstances under which regular banks may not be willing to lend. Particularly in an environment of regulatory and political volatility, private lenders are growing in prominence as a flexible, bespoke financing alternative to traditional lending models.

Second, “net asset value” or “NAV” loans have emerged as a popular form of lending to investment funds and asset managers. In these deals, cash flows and the value of the fund’s underlying assets serve as collateral against which funds are loaned. NAV loans can be used to increase capital efficiency and/or produce cash proceeds available for distribution to limited partners. As of January 2025, some estimates valued the NAV market at approximately USD100 billion, with others predicting growth to USD150 billion by 2030.

More and more often, the debt documents of private equity portfolio companies allow the sponsor to sell the borrower portfolio company without needing to refinance the debt. This flexibility is particularly valuable in increasing interest rate environments, where the cost of new debt at the time of a takeover might be much higher than the company’s then-existing debt that was put in place years before. Private equity sponsors had, for years, attempted to introduce this concept to the debt financing market. Only recently has the provision begun to appear in debt documents with some frequency, and the parameters around these terms can vary: some limit the use of portability to once during the life of a financing agreement; others permit private equity owners to sell only to certain “white-listed” buyers.

Legal and Regulatory Developments

Amendments to the Delaware General Corporation Law revitalise the MFW cleansing framework

Since the Delaware Supreme Court’s 2014 opinion in Kahn v M&F Worldwide Corp., private equity sponsors engaging in conflicted take-private transactions have been able to avoid an onerous “entire fairness” judicial review, and instead receive business judgement rule treatment, by conditioning the transaction on approval of both a special committee of independent directors and a fully informed majority of disinterested stockholders. However, recent Delaware judicial decisions had made it more difficult and unreliable to comply with the MFW framework. For example, in In re Match Group, Inc. Derivative Litigation, in April 2024, the Delaware Supreme Court held that all members of a special committee, not just a majority, must be independent in order to obtain the desired cleansing effect of the MFW framework, and the same court, in May 2024, held in City of Sarasota Firefighters’ Pension Fund v Inovalon that insufficient disclosure with respect to a target financial adviser’s conflicts of interest rendered the minority stockholders’ votes uninformed. In light of these judicial developments, some sponsors decided to forgo seeking approval of minority stockholders and instead focused their risk mitigation efforts on building a robust special committee process to shift the burden to the plaintiff in stockholder litigation to prove that a transaction was not entirely fair.

In March 2025, Delaware adopted amendments to the Delaware General Corporation Law that clarify the standards for what constitutes a conflicted transaction and the “cleansing” mechanisms that controllers may use to de-risk conflicted transactions. The amendments achieve this in two key ways. First, the amended statute provides that a conflicted transaction other than a going-private transaction may be cleansed by either a committee of independent directors or the informed and uncoerced majority of the minority stockholders, and the amendments reaffirm the longstanding presumption under Delaware law that directors are disinterested and independent fiduciaries who discharge their duties in good faith. Second, the amended statute defines a controlling stockholder as one that owns a majority of the voting power of the outstanding stock entitled to vote in the election of directors, has the right to cause the election of a majority of the board of directors or has the functionally equivalent power to that of a majority owner. And whereas prior Delaware case law had remained silent on the required threshold for a stockholder to become a controller, the amendments expressly provide that the holder of less than one-third of a company’s voting power cannot be deemed a controlling stockholder. This new definition reduces the risk of litigation against a large minority investor that enters into a transaction with the company. While Delaware case law is still developing under this new framework, private equity sponsors considering or holding large minority or controlling stakes in publicly traded Delaware corporations should have greater confidence in structuring and executing M&A transactions involving such corporations.

Mindbody decision limits aiding and abetting liability for acquirors

In other good news for private equity sponsors, the Delaware Supreme Court in 2024 reaffirmed important limits on aiding and abetting liability for acquirers. The Court in In re Mindbody, Inc., reversing in part the Court of Chancery, held that a private equity buyer was not liable for aiding and abetting certain sell-side breaches. The Court of Chancery had determined that by reviewing drafts of the target’s proxy statement containing misleading omissions and failing to correct or prevent them, the buyer could be held liable for aiding and abetting. Although the Delaware Supreme Court left open the possibility that a buyer could risk liability stemming from aiding and abetting disclosure violations in the course of reviewing a target’s disclosures, it reversed this decision on the grounds that the private equity firm did not knowingly participate in the target’s material omissions. Specifically, the court reasoned that a third-party buyer is afforded “some protection in its negotiations with potential target companies and the directors and officers of those companies”, and the merger agreement only gave the buyer the opportunity to review the disclosures and to make changes that the target must consider; it did not impose an obligation on the buyer to guarantee the accuracy of the disclosures.

“Liability Management Exercises” Adjudicated

Sponsors continue to pursue out-of-court liability management exercises (LMEs) as “Plan A” for troubled portfolio companies. Techniques deployed by sponsors and creditors have continued to develop in response to market transactions and court decisions. Following any LME that purports to reorder creditor priorities, a major question has been whether the transaction will be respected in a downside scenario. In 2024, courts devoted significant attention to cases presenting that issue. Much of the public attention focused on Incora and Serta – two Chapter 11 cases where litigation challenges to LMEs were successful. But those decisions turned on the application of narrow contractual language and idiosyncratic fact patterns. In Mitel, on the other hand, the New York Appellate Division (whose rulings carry particular weight given how many loan agreements are governed by New York law) fully upheld an uptier transaction. The decision made it clear that challenges to LMEs require specific, on-point contractual prohibitions to succeed; New York courts are not likely to invalidate transactions based on generalised complaints about non-pro-rata treatment or violations of the implied covenant of good faith and fair dealing. While certain forms of transactions may be deterred where specific contractual language is present (eg, Serta-like uptiers with agreements containing “open market purchase” exceptions to pro rata sharing requirements), the twin Serta and Mitel decisions provide the market an overall level of clarity that should encourage dealmaking. Sponsors would do well to heed these twin decisions (and other market developments) when negotiating terms at origination to provide the sponsor with valuable flexibility when an investment does not go as planned.

Antitrust regulators continue rigorous enforcement – but are less hostile to M&A and demonstrate openness to remedies

The US antitrust agencies have continued a multi-year trend of aggressive antitrust enforcement. The Trump administration endorsed the 2023 Merger Guidelines, and rulemaking that went into effect earlier this year that significantly expands the reporting obligations under the HSR Act, including, most notably for private equity, additional disclosure requirements regarding certain limited partners and officer and director interlocks. Both agencies have initiated litigation to block mergers – in January, the DOJ sued to block Hewlett Packard’s proposed acquisition of Juniper Networks (which the parties later settled) and in March, the FTC sued to block GTCR’s proposed acquisition of Surmodics.

Nevertheless, three silver linings demonstrate the antitrust agencies’ greater openness to M&A: (1) the apparent removal of private equity from the crosshairs, (2) the re-emergence of remedies as a solution to competitive concerns and (3) the reinstatement of early termination of the 30-day HSR waiting period. On the first point, in contrast to the prior administration, the Trump administration has disavowed any “antipathy” towards private equity as a business model. As to the second, whereas the prior administration took a de facto “no remedies” position, US antitrust leaders have recently taken a pragmatic stance, allowing structural remedies to address anti-competitive concerns, as in the DOJ’s HPE/Juniper, Safran/Raytheon and Keysight/Spirent settlements, and the FTC’s Couche-Tard/Giant Eagle and Synopsis/Ansys settlements. Finally, the FTC recently reinstated the practice of granting early termination of the HSR waiting period – a practice that ceased under the Biden administration. Although the incidence of early termination appears to be lower than in prior years, this is to be expected as the HSR filings themselves contain more information and documents for the FTC staff to process and review.

Unsurprisingly, in this regulatory environment, the negotiation of regulatory efforts and regulatory break fee provisions has retained prominence as an area of focus in many deal negotiations, with terms governing who has authority to decide on the scope of potential remedies rising to the top of dealmakers’ issues lists. Continued precision in drafting, hand in hand with input from business decision-makers, remains critical.

Conclusion

We remain cautiously optimistic about the outlook for private equity M&A in the second half of 2025, and expect that dealmakers will continue to craft creative and tailored exits to leverage high levels of dry powder despite challenges in the regulatory environment and financing markets. Of course, as the ups and downs of the first half of 2025 have shown, the only predictable feature of the M&A market is that some degree of unpredictability is inherent. As in prior years, we expect continued innovation and adaptation as private equity dealmakers navigate ever-evolving risks and opportunities.