Far fewer deals, much less fresh capital: private equity managers have had a particularly hard time in recent months. A shake-out seems likely, specialists believe. The sector has run into its limits.
Uncertainty over trade tariffs, inflation, and valuations: after a few calm months at the start of 2025, private equity entered a perfect storm from April onward. Buyers and sellers postponed everything, waiting for more confidence in a good outcome and, above all, for more certainty.
That wait-and-see attitude led to the lowest number of closed PE deals (902) since the covid pandemic in 2020, according to recent figures from S&P Global Market Intelligence. In the first quarter of this year the decline was still manageable (14.4 percent lower than in the final three months of 2024), but in the second quarter another 17.3 percent drop followed.
The picture for announced deals is similar, as shown in the latest KPMG report Pulse of Private Equity. Worldwide, the number fell by 17 percent in the second quarter of this year (from 4,527 to 3,769) compared with the first quarter, while the decline in total value was 28 percent.
Meanwhile, managers also struggle to raise new capital. The first half of 2025 was the weakest half-year for fundraising since the corona pandemic. Compared with last year, the decline was more than 17 percent.
Number of closed private equity deals per quarter
It sounds disastrous, but specialists say nuance is needed. Mainly because the source of the pain is clear. Koen van Mierlo, head of analysis at Bluemetric: “Venture capital in particular is struggling.” And Koen Ronda, head of private markets at IBS Capital Allies: “The challenges are especially felt among smaller and lower-quality players.”
At the other end of the spectrum—buyouts and larger, more established names—the pain is less severe. Across the board, fundraising for buyouts is still “fairly stable,” says Van Mierlo. “In the US, private equity raised 150 billion dollars less last year than in 2021, but two-thirds of that ‘loss’ came from venture capital.”
Private wealth
That large firms are currently holding up better is partly due, according to Ronda, to rising demand in the private wealth market, which—unlike the institutional market—has developed strongly in recent years. “The big names and the specialists have been better at capturing this wealth market. Smaller firms have not built the infrastructure for it as well.”
Still, even for large firms the risks are becoming clearer. To start with, because of the lack of deals. Van Mierlo points out that 1.2 trillion dollars in dry powder is still waiting to be deployed. A quarter of that has been sitting idle for at least four years. “Investors don’t like that, of course, because in the meantime you are still paying fees on that committed capital.”
Liquidity
A second warning is the lagging distributions to investors, measured by the DPI ratio (“distributed to paid-in capital”). “It is trailing the historical average,” said Van Mierlo. “A fund launched in 2018 should now have a DPI of 0.8. Investors planned their liquidity on that basis. But the ratio is now 0.6. On an investment of 10 million euros, you have so far received 2 million euros less than you expected. Do you have a solution for that as an investor?”
No wonder then, Ronda of IBS says, that institutional parties now often say “I’ll do a bit less this time.” “And quite a few PE firms are heavily dependent on that institutional market. They will struggle.” Add to that the low number of exits. Ronda does not find the level “dramatic,” but it is not good news either. “We’ve had several years in which the gap between asking price and market price was wide, and sellers said they would ‘wait another year.’ But time is running out now, and holding periods keep lengthening.”
One solution has been found in continuation vehicles. “On the one hand a sign of the times,” Ronda calls their rise. But on the other hand: “They may well become a structural feature, a new standard liquidity route.
Inflation
Asked what comes next, the specialists do not make short-term predictions. They do suggest that private equity is facing “a new reality.” “You could also see this as a temporary shake-out,” says Ronda. “That would be a logical and healthy step in the maturing of private equity. The market has grown very fast in recent years and when things go less well, a few casualties are inevitable. Then we’ll end up in a new balance. Back to normal.”
Especially if inflation rises in the coming period, that scenario becomes more likely. The buyout market could then also be hit harder. Van Mierlo: “A shake-out? Yes, that could happen. In any case, private equity is becoming increasingly competitive. We keep referring back to the boom year of 2021, but that year turned out to be exceptional. In the past ten years there has not been another year that came close in terms of exits and deal volume. But again: it is not all bad across the board. Dispersion among managers remains high. For investors, manager selection matters more than ever.”