Private equity: 2025 in review and outlook for 2026

Speaker A: Foreign.

Speaker B: Welcome back to Money Multiple. Today we're looking back at 2025 and more importantly, what that means for 2026 across deal activity, exits, fundraising, and how GPs and LPs are adapting. While we enter 2026 with strong deal momentum, recent events have posed new challenges which call for adaptation and agility. Joining me to unpack these trends is Peter Witte, EY Global Private Equity Lead Analyst. Peter, great to have you on.

Speaker A: Excellent. Thanks for having me. Excited to be here.

Speaker B: Let's start right at the top. Uh, if you look at overall private equity activity in 2025, it was actually quite strong. Uh, and we entered 2026, I think, with a lot of, um, momentum globally as well as in apac. Yet we now have some, uh, uh, geopolitical headwinds and um, that may have some impact on how the rest of the year plays out. How do you think we are set up for 2026 in terms of, uh, deal activity exits as well as fundraising?

Speaker A: Well, it's interesting and you're right, I think, um, we've really bounced back and forth, um, between being really concerned about geopolitics to being really worried about AI and then back again. And right now both of those things are still very present in the market right now. Um, but I think if we look across 2025, for example, we've seen a lot of great momentum for private equity. Just broadly, uh, deal activities were up more than 50% uh, last year versus the prior year, where especially in the back half of last year, uh, we started to see a lot of conviction, um, coming back into the market, uh, which was great. Um, we also saw some pretty meaningful recovery on the exit side with values there rising more than 50%. And a lot of that momentum was driven by strategics coming back in as acquirers for PE backed assets. And you know, that was just a really positive development from a liquidity perspective. So that was great to see. I, um, think in particular with respect to buy side deals, you know, it wasn't just the number of deals that we saw pick up, it was sponsors leaning into larger and larger transactions. So, um, we tend to track, uh, significant deals, right? So deals valued at $100 million and above, and those deals, um, added up to more than $900 billion in value last year. Deal count though was up pretty modestly. And so the average deal size of course stepped up, which tells us that when pes had conviction on a particular trade that they were willing to write pretty large equity checks. Now I think if we zoom into Asia PAC in Particular the recovery there was probably even more striking but it was also a little more selective. Um, we saw significant uh, private equity investments in the region, um, grow just under 50% by value. And the number of deals uh, increased by almost a quarter which was great. Now a lot of that momentum came from India and Japan in particular where we saw a lot of strong activity and some pretty good exit visibility. While China's share, the regional um, deal value was uh, a little bit softer. Um, so I think what we're seeing in Asia PAC is just this story of where you play matters, where capital is flowing into markets with really supportive uh, fundamentals and very, very clear policy, um, uh, environments. Um, and then to your point about fundraising, I think um, that was an area that remained pretty challenging. Um, and we can talk about the role of exits as that as we go along. Um, but I think globally we saw roughly a 15% decline in total capital raise. And so fundraising has kind of lagged, um, the rebound that we've seen in deals and exits. Now Asia PAC funds bucked that trend which was Fantastic. They raised 15% more capital last year than it did the year before. Which really underscores LP's willingness to put money to work in emerging consumer driven economies, um, where you've got differentiated return streams driven by different factors than you have in um, markets like the US and Europe that tend to be more crowded. So the big question of course is, you know, what does all that tell us about where we're headed this year? Um, and I would say, you know, um, we're starting to see the market normalize a little bit. We're starting to see it move forward despite some of the geopolitical developments. Um, we probably do see a little softness in the first quarter as we move into this year. Um, but this is going to be a year that's really focused on liquidity. That's going to be top of mind for everybody.

Speaker B: I think I like that. So overall, uh, the message is there is momentum. Things are looking positive from where they were say 12, 18 months ago. I want to talk a little bit more about uh, apac and um, you mentioned this, um, uh, I think you used the phrase where to play. And that's an interesting one because when we look at the overall apac, uh share as a total, as a percentage of uh, global uh, uh, private capital activity, it has actually come down a little bit over the last couple uh, of years. Yet as you said, there's some markets with quite strong momentum and uh, uh, for the large deals I think the momentum has come back. Can you probably talk a little bit about uh, uh, what I guess are the converging trends and what are the diverging trends between uh, let's say global private equity and private capital activity and, and what do you see in apac?

Speaker A: Yeah, it's a great question I think. Um, you know, so there's, there's definitely some clear areas of convergence, right, um, and overlap with the global trends that we're seeing. Um, but there's also a few areas of you know, clear differentiation there. And I think on the convergence side, um, the big theme everywhere is you know, discipline first investing. Right? So globally, Asia PAC as well, um, GPS are going to prioritize, um, control situations where they can really roll up their sleeves and drive operational value creation. So um, all the things that we do every day, improving margins, sharpening up commercial excellence, um, digital transformation, especially AI, uh, enabled transformation now rather than just that historical playbook of financial engineering and letting uh, macro growth do a lot of the heavy lifting, um, I think we're seeing a similar pattern on the LP side where investors are starting to consolidate relationships into a smaller set of platforms. Um, they're leaning into gps that have proven track records, managers that have shown that they can navigate all this volatility that we're seeing, um, and still deliver on realizations. Um, and that flight to quality is just as visible in APAC as it is in North America, Europe. Um, I think where things start to diverge a little bit is how uneven Asia PAC has become. Right. Um, we've seen a uh, measure of geographic rotation where India and Japan have clearly moved up. Um, they've become a lot more high profile. Um, China remains a little more subdued just because of some of the structural and geopolitical headwinds there. Um, over the past few years. For example, um, you know India's share of Asia PAC deal activity has been comparable to in some years even higher than China's, you know, um, despite a clear gap in the size of their relative economies. Um, so that's a fundamental shift in where and how capital is getting deployed. Japan's um, another interesting region where you know we're seeing lots of activity that's supported by carve out activity. Um, we saw more than $4 billion worth of those deals last year. Um, that's being driven by um, corporate governance reforms. But beyond that just a willingness among corporates to sell off some of these non core assets and that plays right into private equity strengths. Um, and then lastly I would say um, we're seeing A sector rotation that's happening across Asia, pac, uh as well where GPS are leaning um, a little bit away I think from pure tech and cloud where they've been very focused for the last um, um several years at least, um, towards a broadening of you know, more financial services, uh, more consumer energy, real estate and especially infrastructure adjacent themes um, that are tied to rising consumption and especially you know the build out of real world infrastructure. And I think that broadening of the market is really exciting and a really positive development for um, for the deal space.

Speaker B: Well thanks for that piece and apac, I mean just to, just to kind of enunciate further what you were saying. Right. There's a lot of very interesting diversity in the investment thematics. Uh so India uh, actually as well as Southeast Asia where I'm based, there's a big growth story playing out uh in all of these markets and therefore the orientation for the investment is very much growth. If uh, you look at Japan, Korea, I think uh, you talked about the carve outs and the um, say the restructuring of the large conglomerates, um and that's a big theme and frankly that creates some excellent large buyout opportunities. Australia has always had a very steady market and in many ways it resembles um, uh what uh private capital is used to seeing in US and Europe. So it's a nice diversity of thematics I think. China um, uh, I mean it's going through a big shift at the moment and I think there's a lot of domestic pools of capital that have come into in a way replace some of those international pools that have been investing. Uh, so that's an interesting transition. Also I think in all of this uh, there's a lot more pressure on GPS and uh, if you think about um, how they need to position themselves to create value, um, I think the playbook for the next few years is going to be a little bit different um, from the last few years. So can you talk a little bit about that? I mean what's non negotiable in the playbook? How does the playbook change and also um, uh, uh, how does that evolve over the next couple of years?

Speaker A: Well I think there's a few things that are really um, truly non negotiable with respect to the playbook. I think those things are going to matter even more um, given the volatility of the environment um, that we're seeing um, as we head into the rest of the year here. Um, and the first is really around um, control stakes plus um, engineered value creation. So we're seeing across markets um but especially in Asia PAC where GPs want situations where you know they can really shape the outcome. So that's carve outs, it's platform plays um and it's both on uh, M and A activity. Um so again you know you just look at Japan as an example right after Covid the value of carve out deals um has averaged three to four billion dollars a year. Right? That's a major opportunity set um and at the same time we've seen a pretty steady rise in add on deals where you know GPS consolidate a lot of um, you know um, mid and lower end markets and you can just build scout scale platforms that you can exit for higher multiples. Um so that kind of baked in value creation where um versus um you know just hoping for a rising tide is now going to be front and center of the playbook. Um secondly I think there's sort of a rethinking as to what winning means um in Asia from a sector perspective. And so just this rotation towards services, financials, infrastructure adjacent assets um that are tied to real economy demand. So things like energy transition, um, industrial upgrades, logistics, consumer services and you could see all of this um in the recent deal data right? So um, P activity in the energy space for example up almost 200% industrials up almost 400% last year. Uh real estate more than doubled last year, consumer more than doubled. Um and at the same time the value of tech deals fell by about a third M. Now it doesn't mean tech is out right but it does mean I think that gps are being a lot more selective and they're leaning into some of these assets where they've got good visibility into future cash flows and they've got some measure of downside protection at least as much of that as you can get these days. Um and then lastly I would just say um, um um with respect to non negotiables there's a third and let's just call that flexibility around capital and liquidity. So given the exit environment in the last few years gps are tapping into um a broader toolkit um versus what was available to them in the past. Um so they're using more creative liquidity solutions, more um creative capital um structures and in some cases where it makes sense um, a greater willingness to hold assets for longer than originally um intended um where the investment thesis is playing out and I think the LPs are accommodative of that um when they see a long term plan to continue value creation opportunities um and so that can Mean everything from more bespoke financing at the asset level to using different kind of structured solutions, to looking at secondaries, other liquidity, uh, options. Um, but I think we've moved on from that world of we're going to buy it, we're going to fix it, we're going to sell it in five years and then move on is just giving way toward a much more flexible model with flexible hold periods. Um, but it comes with um, a caveat. It comes with a higher bar with respect to what you do with that extra time.

Speaker B: And Pete, take privates for a big topic in 2025. Uh, do you see that carrying on into 2026 given we're now looking at potentially lower interest rates as the rest of the year plays out?

Speaker A: Yeah, so we did see the window open last year. Um, take privates came back sponsor to sponsor deals came back. Um, there was a noticeable return of larger deals, megadeals. As the financing environment improved, sellers became more realistic on valuations. Um, deal activity was up about 60% last year. Volume was up about 15%. And I think um, what's interesting is that because of some of these huge deals, including you know we saw the largest buyout of all time, M announced last year. Average um, deal size jumped to more than a billion and a half dollars. We saw 13 deals break that $10 billion mark last year. We've never seen that before. Um, in Asia, pac, I think that same dynamic was present, but the window there was a little more selective. Right. So um, the average deal sizes in Asia also increase, um, by about 20%, which tells you that, you know, larger deals did get done, um, but under a narrower set of um, markets and conditions. Right. So um, Japan again has been one of the stronger contributors. Steady pipeline of carve outs. Um, other markets have been a little more episodic depending on you know, domestic policy and FX and how comfortable lenders have been with some of those, um, uh, you know, local conditions. Um, I think as we look into the balance of this year, um, the window can remain open but it's going to, you know, be highly dependent on the macro and the policy, uh, environment. Um, you know, I think a continued gradual move down in interest rates, um, more stable trade dynamics will certainly help, um, and avoiding some of these, you know, um, idiosyncratic externalities that seem to rock the market every few months. Um, you know, if that path holds, then we should continue to see a healthy mix of take privates, uh, secondary deals, the occasional mega deal, um, especially for some of these higher quality assets. Where you know, um, there's a clear value creation imperative. Um, so I wouldn't describe it as just a, you know, one way ever widening window. Um, but um, again, you know, um, it's just going to hinge on a few things, right? Um, interest rates and spreads, um, appetite. Ah, for credit and the policy environment.

Speaker B: And you mentioned credit so clearly for these large transactions. I think financing is very important. Uh, private credit has played an uh, increasingly large role in that I uh, guess both globally as well as growing in our region. APAC as well. Uh, and maybe I want to zoom out a little bit and then get back into the private credit story. Uh, when you look at the broadening of uh, the private capital asset class, I think credit has been a big one over the last few years. Uh, there's also been infra and uh, digital infra being a big topic and then uh, real estate's the other one and these are quite capital intensive, uh, spaces. Um, maybe two questions there, I guess. One is uh, globally, do you see that trajectory continuing? Maybe you can focus a little bit also on some of the trends in private credit. And then I wanted to kind of zoom back into APAC because clearly APAC's at an earlier stage of that curve. So how do you see the APAC trends in this space playing out as well?

Speaker A: If we break it out into those components, um, just what these asset classes are likely to do overall and then um, what that looks like, uh, in um, the Asia PAC context. A couple things I um, think first on um, overall just growth and performance of the asset classes. I um, think all three, um, credit infrastructure, real estate, um, all three of those remain really relevant for investor uh, portfolios. Um, private markets are as much about diversification as they are about performance. And I think with public markets being increasingly concentrated, um, that's gonna be a uh, really important part um, of investors portfolios as they search for less correlated sources of alpha. We see this in the US just all over the place where 40% of the S&P5 is made up of 10 stocks. Um, and so with private credit for example, we've seen tremendous growth. Um, direct fundraising globally uh, over the last five years has grown at a CAGR of almost 20%. Um, which is just incredible growth. Um, in Asia PAC we're starting from a smaller base, um, but we still see very strong momentum there. Um, private debt issuance last year was more than three times, uh the prior year. 2026 is off to such a strong start that issuance so far has already exceeded everything that we saw in all of last year. Um, now I think there's a lot of questions out there um, at the moment and a lot of angst about what happens ah, from a liquidity standpoint when you package some of these products into retail oriented vehicles. Um and probably two more broadly just about the underlying credit quality of some of the holdings, especially those in the software space where we've seen credit spreads software um, for example widened by call it 200, 300 basis points over the last few weeks while other sectors have remained relatively steady. So that's obviously something that we're going to have to play out over the next few months. But you set aside these um, cyclical issues and the sector considerations and the direction of travel for credit, especially in Asia. PAC I think just continues to favor long term growth. Um, on the infrastructure side I uh, think the story is especially compelling when you know you talk about digital and energy transition related themes. Um, so digital infrastructure, so towers, fiber, data centers, all attracting capital because they sit at the intersection of long term demand and resilient cash flows. So um, uh a couple of months ago for example we went out, we did our quarterly survey of private equity GPs and we asked them what spaces they thought were going to be high on the agenda for investment this year. Um, gps were nearly unanimous in calling out digital uh, infrastructure in particular uh as a really interesting space. Um and then on the real estate front I think we're seeing um, portfolios start to rotate from more um, um, traditional office space, non prime retail, that kind of a thing toward again more infrastructure like segments so logistics, data centers, other kinds of related real assets. And I think it's exciting in Asia because all of these themes um, collide with the extant trends in urbanization, renewables, everything else. And you've got some really strong tailwinds there.

Speaker B: I mean if you look at Asia across generally there's um, a, I mean the population's fairly young, it's a very aspirational population. Uh, there's great demand for good infrastructure, education, healthcare. Uh, data is in high demand as well. So I think all of these fuel the trends that you describe. Uh, that though calls for a lot of capital to be allocated. And um, uh when you look at, and the comment you made earlier was globally fundraising uh, was actually down last year, uh though it was up in apac. That's good news in apac. But how do you see uh, LP sentiment at the moment? Um, is that, is there a uh, you know given 25 activity was quite strong, is there now ah, an Appetite to increase allocation. So are you seeing some caution? Maybe if you can help us unpack that a little bit.

Speaker A: Yeah, it's a great question and I think, um, you know, a lot of questions about it. Right. Um, I do think that LPs remain very committed to the asset class, but we are seeing, um, you know, uh, uh, an increase in selectivity. Right. So I think sentiment has clearly improved versus a year ago. Investors, um, are more comfortable with the macro backdrop. I, um, think they see, you know, that momentum that's built on the deal side and the exit side. Uh, they want to keep their private market programs moving forward. Um, but they are being very deliberate about where that capital goes. Um, and I think just by, um, uh, necessity, they're really prioritizing a few things in terms of where they commit new capital. Um, first and foremost, um, it's exit track record. Right. So exit's obviously been slow. Um, and so they're rewarding managers who can demonstrate dpi. Right? So distributions versus paid in capital, essentially realizations. Right. Um, and where, uh, gps can, um, clearly articulate that they have a credible path to liquidity for the assets in the portfolio, um, the second is around operating alpha. And we see this all the time with our clients where they're looking to very clearly articulate and demonstrate, um, that operational, uh, value add. Um, and so LPs want to see that evidence that, um, uh, uh, uh, value creation is coming from margins, from growth, from transformational, not just financial engineering. Um, and I think the third is a well defined and clearly articulated strategy. Um, this has always been the case for as long as PE has been an asset class where as a gp, you have to have a repeatable edge, whether that's sector specialization, a particular type of deals, that you're focused on, a particular region, whatever, um, it is, right? Um, and so because of that, I think we're seeing fundraising consolidate into fewer, larger platforms. Um, that's occurring both globally and across Asia. Um, and if you're a strong performer with very deep existing relationships, um, you're going to see re ups from your LPs. And if you are a newer or emerging manager, less proven, then the bar has gone up. Um, you know, LPs right now are liquidity constraints, so it's difficult for them. Um, you know, as an lp, you have to make a decision, right? When a new fund comes knocking on your door, um, do you impose a haircut across the entire portfolio or do you double down on your best managers? And I think the dynamics right now that we're seeing from a fundraising perspective, um, uh, LPs are often choosing the latter, right? And so I think for the market to really broaden out from where we are right now, distributions have to improve, um, more cash has to go back to the LPs, um, and so then I think the pattern that we're seeing right now stays in place with that more selective market.

Speaker B: And one of the interesting things that's been playing out in the region, I suppose in other regions as well is we are seeing consolidation among the LPs. So certainly the large uh, uh, sorry, the GPS, I meant, uh, and some of the large GPS, uh, the global GPS, they've actually been filling out parts of their strategy in APAC that they lacked earlier. Uh, and I think that's quite interesting because uh, when, when these gps with a very broad set of product go to the LPs, they are actually able to offer that optionality. And I think that is an attractive proposition. So then uh, either you're a very specialized gp, uh and you're really good at one thing that you do, or you are uh, let's call it a full line generalist, would you say? Um, those are the two kind of differentiating points now in the fund in as GP goes out to raise money.

Speaker A: Yeah, 100%. I mean I think we really see this bifurcation of the market where you know, managers have to think about, all right, we're either going to pursue specialization on one side, right? Um, and again you know, that can be um, that can be a strategy, it can be deep, deep sector expertise, um, a particular type of deals. It can be a region, whatever it is, um, and you know, LPs will um, um will tend to back those funds or you can pursue scale right through um, building out product lines, um, through large global expansion, um, all these dynamics, offering lots of product offerings under one roof and doing it in a very cost effective manner.

Speaker B: And Peter, you also reference distributions and that is I think quite key to keep the blood flowing so to speak, right in the industry, uh, uh, the last few years have been tough. I think uh, the good news was 2025 was better. And uh, as we look forward we do see across apac, uh, I think quite a healthy pipeline of exits planned. Uh what do gps need to do uh, differently and how do they need to better prepare themselves to uh, achieve these distributions?

Speaker A: I think exits for GPs and LPs alike are, that's priority, um, A, B and C. Right. And so um, exit planning is front and center for everybody. But you know, um, You've got to be more deliberate about it, you've got to be a little more creative about it, um, you know, than you were in the last cycle. You know, if you kind of rewind to 20, 21, 20, 22, as a, as a GP, you were essentially able to sell almost anything that wasn't nailed down. Right. Um, but since then, we've been in essentially the worst exit drought that the industry's really had to experience. Um, and to your point, you know, the good news is that the momentum there has improved over the last nine months in particular, but it's still, you know, somewhat uneven. And so as a gp, uh, you've got to raise your game a little bit. I, um, think the data there is pretty clear. Um, you know, global exit activity was up, uh, 50, uh, 6% last year by value. Um, volumes increased almost a quarter. That's more than what we saw on the buy side. Um, and what's interesting about it is that it was really corporates that drove the bulk of that recovery. Right? So they accounted for more than two thirds of exits last year. IPO activity still pretty muted. Um, you know, that was true globally, uh, and in Asia pac. Um, but, uh, again, you know, picture there, um, still pretty uneven, uh, across countries. India stood out where exit value more than doubled, again driven by corporate buyers. Um, um, and then continuation vehicles rose by more than 20% last year in mature markets like the US and Europe. Uh, and in Asia PAC, they're up more than 5x, um, albeit from a pretty low base. Um, but I think that mix tells you a few things about, you know, as a gp, what do you have to do to plan? Um, first and foremost, you have to assume that, you know, trade and private equity, um, pe, the PE exits are going to carry more of the load, uh, than IPOs, at least over the near term. Um, and so that means thinking very early and very strategically, ah, about what that, um, likely, um, set of buyers looks like, what they're going to pay for, how do you position the asset? Um, you know, um, and what do you have to do to get those assets ready? Right, Cleaning up the governments, making sure the business is going to be plug and play for these corporate acquirers. Um, you know, uh, in markets like India and Japan especially, where corporates are very active as buyers for these assets, that strategic lens is absolutely critical. Um, and then, you know, I think, um, um, you know, exit readiness really just has to be built in from a much m earlier stage in the holding period than what we're seeing. Right? Now, um, and that's true in Asia pac, just like it is in, um, uh, the US or Europe. Um, you know, you don't whip out a successful exit, um, in the last three months that you own the asset. Right? Um, and I think that's especially important now, where we're operating in such a volatile environment, where the window opens and closes with such, um, uh, unpredictability. Um, and so, you know, starting 12 months ahead of time, ideally even longer than that, you know, building a very clear, incredible exit story, making sure that the management team's well prepared, um, the financials are in good order, um, all really critical right now. Um, these corporate buyers, um, that we're seeing, they're not willing to price in heavily adjusted Ebitdas, right? They want clear financials, um, with a clear path for the next buyers. Um, and so those are the sellers that are able to deliver on that, that are going to maximize oax value.

Speaker B: Pete, thank you very much. That's been very, very insightful. Maybe as a closing question, let me ask you, what do you think should be some of the top issues that, uh, should be on everybody's watch list, uh, in 2026, both, uh, globally as well as in, uh, the APAC region?

Speaker A: I'd say a few things. Uh, you probably put four things, um, on the watch list for the rest of this year. Um, three of those are going to be global, uh, and then one of those is specific to Asia Pacific. Um, first is just rates, um, policy clarity, just overall, uh, geopolitical stability. Um, essentially everything that we've talked about so far sits on top of the macro situation, sits on top of the policy backdrop. Um, and so having that steady, clear path for interest rates, clear regulatory signals and so on is going to help support risk appetite and, uh, the availability of credit, um, any sort of additional idiosyncratic externalities out there that could feed into deal flow, um, and in particular impede the broadening of the market beyond this small number of large deals that we're seeing right now, um, will, uh, impede the market. Um, secondly, uh, as we talked about, is just exit velocity. And to what degree GPs can convert paper marks into actual distributions and give LPs more flexibility to go out and recommit new funds. That gets that whole flywheel going again of raising capital, deploying capital, distributing capital back to LPs, and that's really what we need. And then third is, uh, around operating alpha, right? So in a world of higher baseline rates, more selective, uh, LPs, um, value creation has to come from the fundamentals of the business. And so we'll be watching how gps are leaning into margin growth transformation, especially those digital levers, and how that translates into exit outcomes. Um, and then from an Asia PAC perspective, I think is really, uh, around the development of new themes and asset classes. Uh, so clean energy, uh, excuse me, clean energy, great example there. Um, last year, deal activity in that space more than doubled versus the year before. And it's becoming a core part of the regional opportunity set. And then at the same time, we're seeing asset classes like private credit infrastructure build more momentum in Asia, um, and how quickly those segments are able to scale and how quickly capital rotates toward areas like energy transition and digital and physical infrastructure that's going to shape the deal landscape and the fundraising mix in the region over the next few years. Um, and so I think for a lot of reasons, it's a really interesting time in private equity. Um, really challenging in a lot of ways. But I think one thing that we know about the asset class is that we, when the environment starts to get more challenging, the opportunities get more interesting. And, um, the firms with the conviction and the operational capabilities to back that up have the potential to make some really interesting investments.

Speaker B: Pete, this has been really insightful. Thank you for joining us.

Speaker A: Thanks, Rav.

Speaker B: Pete, thanks so much for the insights. And thanks to our listeners for joining this edition of Money Multiple. For more details, you can always find our latest thinking and Global podcasts on ey.com thanks so much for joining us.