Core Insights - Higher interest rates and changing market conditions have significantly impacted private equity deal-making, with the report indicating that "12 is the new five," meaning that current deals require faster EBITDA growth than in the past [1] Group 1: Market Conditions - In 2015, firms could achieve a 2.5x return with a 5% annual EBITDA growth due to cheaper debt and rising valuations; now, with higher borrowing costs, deals require approximately 10% to 12% annual EBITDA growth for the same return over five years [3] - The private equity industry is currently facing challenges with 32,000 unsold companies valued at $3.8 trillion, leading to a more difficult fundraising environment for general partners (GPs) [5] Group 2: Investment Strategies - Limited Partners (LPs) are shifting their focus towards private credit, special situations, asset-backed finance, infrastructure, real estate, secondaries, and semi-liquid and evergreen vehicles [5] - Many GPs are holding assets longer to allow time for strategies to increase EBITDA, but this approach may incur costs as internal rates of return (IRR) tend to plateau around the seventh year and decline thereafter [6] Group 3: Future Outlook - Continuation vehicles are providing some relief for GPs under pressure to monetize assets, although they currently account for less than 10% of exit value and are not a long-term solution to liquidity issues [7] - The outlook for 2026 appears promising with an easing interest rate environment, a flowing deal pipeline, and a more robust public offering market, leading GPs to expect more exits and reduced reliance on alternative liquidity mechanisms [7][8]

Core Insights - The private equity industry is experiencing its worst performance since the financial crisis, with returns to investors declining for four consecutive years [2][5]. Distribution and Returns - Private equity firms distributed 14% of their net asset value to investors in 2025, consistent with the previous year, and significantly down from 32% in 2021 [2]. - This decline in returns has persisted longer than after the 2008 financial crisis, where distributions rebounded after two years [2]. Market Activity - The total number of private equity sales decreased by 2% to 1,570 last year [4]. - The value of exits increased by 47% to $717 billion, driven by major sales, with seven large exits accounting for 20% of this total [6]. Investment Holding Period - Private equity funds are now holding investments for approximately seven years before exiting, an increase from five to six years between 2010 and 2021 [7]. Continuation Vehicles - The transaction value of continuation vehicles rose by 62% last year and has increased by 37% annually since 2022, although they still represent less than 10% of total private equity exits [8]. - Interest in continuation vehicles is growing, with 40% of industry respondents indicating plans to explore these options in the next one to two years [8].

Core Insights - The private equity industry is experiencing longer hold periods and fewer but larger deals, which may represent a "new normal" for the sector [1] Group 1: Deal Value and Trends - Total private equity deal value reached $2.6 trillion globally in 2025, marking a 19% increase from 2024 and the second-highest value on record [2] - The largest private equity deal in history, valued at $55 billion, involved taking video game maker Electronic Arts private, significantly contributing to the overall deal value [2] - Despite the increase in deal value, the total global deal count fell by 9% in 2025, continuing a trend of declining deal counts since a peak of approximately 80,000 deals in 2021 [3] Group 2: Holding Periods and Backlog - Private equity firms are holding assets longer, with a backlog of about 16,000 portfolio companies owned for over four years in 2025, up from 13,000 in 2024 [4] - The average holding period for a typical company in a general partner's portfolio is now over six and a half years, which is significantly longer than historical averages [5] Group 3: Liquidity Solutions - The use of continuation vehicles, where private equity firms sell assets back to themselves, has gained popularity, with the value of such liquidity solutions tripling from $35 billion in 2020 to $115 billion in 2025 [5] - Approximately 14% of all sponsor-backed exits are conducted through continuation vehicles, indicating a shift in exit strategies [5] - The liquidity for investors remains limited, with trends like secondaries and continuation vehicles becoming more established in the private equity landscape [6]