Reasons for Optimism as Attractive Acquisition Opportunities Emerge

In line with many commentators’ optimistic forecasts, private equity dealmaking grew significantly over the course of 2025, marking a continuation of the rebound in private equity dealmaking that began in 2024. Overall deal volume remained strong in the first half of 2026 – albeit with notably fewer private equity mega-deals – even in the face of macroeconomic, geopolitical and secular uncertainty. Many of the factors that helped propel private equity dealmaking in 2025 remain today – including record high levels of dry powder, pressure for liquidity events, increased interest in investment in digital and data infrastructure spurred by the rapid proliferation of artificial intelligence (AI) technology and now, more stability around the impact of global tariffs.

The rise (and fall?) of private equity mega-deals

Global private equity deal volume in 2025 was almost USD2.1 trillion, surpassing the levels seen in the prior three years. The growth in deal volume was primarily driven by the increasing size – rather than number – of private equity deals. While aggregate deal value in 2025 was up 15% from USD1.8 trillion in 2024, the number of private equity deals increased by only 1%, from 20,836 deals to 21,026 deals.

This increase in deal value coincided with the re-emergence of private equity mega-deals, primarily taking the form of private equity buyouts of large public companies. In 2025, there were 28 buyouts above USD1 billion in equity value, 16 buyouts above USD2 billion in equity value and 10 above USD5 billion in equity value. Much of this mega-deal activity came in the second half of the year, with 19 buyouts above USD1 billion, nine above USD2 billion and seven above USD5 billion. Some of the most notable examples included the USD55 billion acquisition of Electronic Arts by a consortium comprising the Saudi Arabia Public Investment Fund, Silver Lake and Affinity Partners (which represented the largest all-cash sponsor take-private in history), the USD18 billion acquisition of Hologic by Blackstone and TPG and the USD12 billion acquisition of Dayforce by Thoma Bravo.

Private equity deal volume has remained robust in 2026, albeit not at the levels of 2025. Aggregate global private equity deal value in the first half of 2026 was approximately USD856 billion, comprising 9,840 transactions. Notwithstanding the robust overall level of deal volume, 2026 has seen a notable decline in large buyouts, with only four private equity deals above USD1 billion and two deals above USD2 billion in the first half. This reduction is likely due to a confluence of disparate factors, including: (i) increased competition from strategic buyers due to a more favourable regulatory environment for strategic deals; (ii) frothy – and, in the eyes of some, inflated – valuations for US public companies, which increases both the acquisition cost for a private equity acquiror and the value of stock consideration that could be used by a public company acquiror; (iii) secular turbulence due to uncertainty about the effects of AI on various industries; and (iv) continued geopolitical uncertainty, which endures despite hints of improvement earlier in the year. It remains to be seen whether these headwinds will continue to dampen private equity mega-deal activity throughout the second half and persist into next year.

Pressure for exits, but help may be on the horizon

Following muted private equity exit activity in 2023 and 2024, aggregate global exit value increased from USD859 billion in 2024 to USD1.3 trillion in 2025, although exit count declined from 3,766 to 3,162. Private equity exit activity has remained relatively constant in the first half of 2026, with 1,583 exits totalling approximately USD569 billion. Against this backdrop, private equity inventory is ageing: the median age of still-held private equity assets has increased from three years in 2022 to four years in 2025, and 26.9% of private equity-backed assets are now seven years or older. This trend shows no imminent signs of reversal, as sponsors are exiting assets acquired in the 2021 private equity M&A boom at slower rates than assets acquired in earlier years – just 18% of investments acquired in 2021 have been monetised to date, versus 32% of assets acquired in 2017 at the same point in maturity. Investors have become wary as the current exit environment is yielding slower returns and weak distributions to paid-in capital (DPI) metrics – funds returned only 12% of asset value to investors in 2025, just over half the 20-year average of 21%. Private equity funds will continue to face pressure to provide their limited partners with liquidity events for long-held investments.

Non-traditional exit strategies grew in popularity in 2023 and 2024 as the traditional exit market was strained by an elevated interest rate environment, increased regulatory scrutiny and a muted IPO market, and have remained prevalent given the growing length of holding periods. These alternative exit strategies included partial exits and multi-sponsor transactions, such as sponsor-to-sponsor sales and rollups among portfolio companies where multiple sponsors became large co-investors in one combined company.

These multi-sponsor transactions can give rise to significant misalignments among shareholders, due to differing buy-in prices and/or investment durations. Such potential misalignments need to be considered when negotiating the terms of partial exits and the go-forward governance arrangements, but they are unlikely to be fully resolved in advance. Sponsors are well-advised, therefore, to pick their partners carefully and to treat these misalignments as matters to be continuously monitored, managed and negotiated as part of a strategy of good relations with investors.

Continuation funds remained another popular alternative exit strategy. Continuation funds create frictions between sponsors and LPs related to existing LPs wanting the highest purchase price while continuation fund investors want the lowest price. In addition, in June of this year, it was reported that the SEC was investigating the use of continuation funds, including potential conflicts of interest, asset valuations and the adequacy and consistency of investor disclosures. It remains to be seen whether the growth in secondary and co-investment funds will cause the use of continuation funds to increase going forward or whether alignment issues will keep their use consistent with current levels. In any case, potential alignment and reputational issues should be managed carefully.

In the world of traditional exits, the political and regulatory environment has become increasingly favourable to traditional exits, such as sales to strategic acquirors and IPOs. In particular, the SEC has advanced a series of policy proposals that, if adopted, would reduce certain burdens associated with being a US public company and enhance the attractiveness of IPOs. SEC Chairman Paul S. Atkins has stated that one of the SEC’s top priorities is to “make IPOs great again” through reforms to make “being a public company an attractive proposition to more firms”. Chairman Atkins noted that this includes reforming disclosure regimes so that they are rooted in the concept of financial materiality and scale with the subject company, de-politicising shareholder meetings and reforming the litigation landscape for securities lawsuits to eliminate frivolous complaints. For example, in May of this year, the SEC proposed new amendments that would allow issuers to opt in to semi-annual reporting on a new Form 10-S in lieu of quarterly reporting on Form 10-Q. In addition, in November of 2025, the SEC stated that it generally would not respond to no-action requests from companies related to the exclusion of shareholder proposals under Rule 14a-8 during the 2025–26 proxy season. More recently, Chairman Atkins indicated that the SEC is holistically reevaluating Rule 14a-8 which, depending on if and to what extent changes are made, may reduce the burden on public companies in connection with annual shareholder meetings.

It is still too early to tell the extent of any effects of these proposed regulatory changes on the IPO market, or even the extent to which proposed changes will become final rules. However, any increase in the viability and efficiency of IPOs would likely be a welcome development for private equity funds searching for liquidity avenues for long-dated investments.

The increasing prominence of sovereign wealth funds

As the number and size of large private equity deals grew in 2025 – and as the equity checks for those deals increased accordingly – sponsors increasingly turned to sovereign wealth funds as a source of equity capital. Sovereign wealth fund capital played a role in many of the year’s largest deals. Notable examples include the Saudi Arabia Public Investment Fund’s participation in the take-private of Electronic Arts and the Qatar Investment Authority’s participation in the take-private of Janus Henderson.

Notwithstanding the growing prominence of sovereign wealth funds as co-investors, the participation of a sovereign wealth fund as a significant co-investor presents unique sensitivities, especially if it has meaningful governance rights. Certain key areas to consider include contractual allocation of the regulatory risk arising from sovereign fund participation, ensuring enforceability against the sovereign fund in US courts and the provision of necessary information by the sovereign fund for regulatory and securities law filings while balancing sensitivities that sovereign funds may have regarding disclosures to regulators and the public. These matters should be addressed pre-signing to ensure proper alignment among the parties.

Creative deal structures

Private equity sponsors have continued the trend of utilising creative structures to execute deals, such as through transactions involving or partnerships with other sponsors or strategics. As noted above, various forms of non-traditional exits, such as continuation funds and sponsor-to-sponsor sales, have remained popular even as the market for exits has opened up over the last year and a half.

More recently, sponsors have employed other creative deal structures, such as the unique three-way transaction among GTCR, Global Payments and FIS which was completed in January of this year, pursuant to which Global Payments acquired GTCR’s 55% stake and FIS’s 45% stake in Worldpay for USD24.25 billion in cash and stock, and FIS concurrently acquired Global Payments’ Issuer Solutions business through a combination of cash and the transfer of its 45% Worldpay stake to Global Payments. The transaction structure allowed GTCR to exit its previous 55% investment in Worldpay while taking a significant ownership stake in Global Payments, and enabled both Global Payments and FIS to enhance and streamline their strategic focus on their respective core businesses.

In addition, private equity sponsors and targets have used contingent value rights (CVRs) to help bridge valuation gaps in transactions involving public company targets. For example, in June 2025, Carlyle and SK Capital acquired bluebird bio by means of a tender offer in which tendering shareholders had the right to elect to receive either an all-cash offer or a lower cash payment at closing along with a CVR payable if bluebird bio meets a specified net sales milestone. The acquisition of Hologic by Blackstone and TPG in April 2026 similarly contemplated a CVR based on the revenue of Hologic’s Breast Health business exceeding certain thresholds in fiscal years 2026 and 2027. CVRs require careful structuring and drafting, including precise articulation of payment milestones and the efforts required on the part of the buyer to achieve such milestones, but can be an effective way to bridge what might otherwise be irreconcilable valuation gaps.

A more favourable regulatory environment, with less focus on private equity

After several years of innovatively aggressive merger enforcement, the last year and a half has seen a return toward more established patterns of antitrust practice, including a willingness to negotiate merger remedies in appropriate cases, rather than resort to litigation to challenge fixable deals. The agencies have also disavowed hostility toward private equity business models. The industry was subject to intense antitrust scrutiny under the Biden administration, which brought aggressive lawsuits against private equity firms, including an unprecedented merger challenge based on a serial-acquirer theory. In contrast, the only challenge against a private equity deal – GTCR’s acquisition of Surmodics – brought by the FTC under the new administration was based on a traditional theory that the transaction would eliminate head-to-head competition between Surmodics and another GTCR portfolio company. A federal court ruled against the FTC, holding that the divestitures offered by the parties resolved any competitive concerns, and the FTC chose not to appeal the ruling, clearing the way for the transaction. A more favourable regulatory environment does not mean that deals will not be subject to scrutiny, however, and it remains important to assess and manage the execution risks of each potential M&A counterparty, whether as part of a competitive bid process or as sponsors consider exit strategies.

The effects of AI

Like almost every other sector and industry, private equity has not escaped the effects of the AI boom. The rapid proliferation of AI technology has not only placed outsized demands on digital and data centre infrastructure in the US – with a concomitant need for private capital investment – but has also created uncertainty across industries as AI has shifted the use and utility of a wide range of technologies.

While much of the most direct AI-related M&A has been in the strategic space – such as OpenAI’s USD6.5 billion acquisition of io Products – the anticipation (and fear) around AI’s disruption of various industries is shifting the calculus for where sponsors are willing to put their money. One particularly prominent example was the “SaaSpocalypse” of February 2026, in which the almost simultaneous roll-outs of ChatGPT-5.3 Codex and Claude Sonnet 4.6 cast doubt on the continuing utility and viability of many standalone software companies, with USD1 trillion of market capitalisation of software stocks erased in one week. According to a survey conducted by Ernst & Young, 64% of private equity professionals interviewed stated that they were becoming more selective in allocating funds to software investments.

On the other hand, industries that generally support the AI boom – eg, the so-called “HALO” assets (Heavy-Asset, Low-Obsolescence), such as semiconductors, power and data centres – are becoming increasingly attractive targets for sponsor capital. US private equity investment in data centres more than tripled to USD45.7 billion in 2025 from USD13.79 billion in 2024; and private equity represented 72% of the USD63.35 billion invested in US data centres in 2025. Further, private infrastructure fundraising hit USD250.7 billion in 2025, up from USD98.8 billion in 2024, with AI- and data centre-related buildouts underscoring much of this fundraising.

In addition, sponsors have reported an increased appetite for investment in industries such as healthcare and pharmaceuticals, where AI may be able to help improve margins and streamline operations. In that vein, one of the stated theses in Trian’s and General Catalyst’s take-private of Janus Henderson was a desire to leverage General Catalyst’s AI platforms to enhance Janus Henderson’s asset management business.

Conclusion

Despite a pullback in the mega-deal activity that characterised private equity M&A in the second half of 2025, there is reason to be optimistic that private equity deal activity will remain robust as creative dealmakers find bespoke ways to negotiate and structure around some of the headwinds that faced the sector in the first half of the year. In particular, to the extent that some of the geopolitical conflicts that characterised the first half move toward resolutions and the impact of AI on various industries becomes clearer, dealmakers may find themselves increasingly willing to deploy capital toward attractive acquisition opportunities. At the same time, certain other headwinds – such as elevated, albeit normalised, interest rates – remain particularly sticky. As always, private equity sponsors and their advisors that stay on top of these developments will be best positioned to take advantage of the opportunities, and effectively prepare for the challenges, that arise.