Private Equity Trends and 2025 Outlook

Several headwinds challenged the private equity (PE) industry in 2024, but the second half of the year saw an uptick in deal activity. Learn what dealmakers need to know in 2025 as competition grows from non-traditional funds, expansion into private credit increases and regulators intensify their focus on the sector, as well as key trends and matter highlights.

Key Trends Shaping the 2025 PE Landscape

• While elevated interest rates, valuation gaps, geopolitical risks and heightened regulatory scrutiny posed headwinds for the global private equity industry in 2024, a pick-up in deal activity in the final two quarters of the year signals a more robust deal market in 2025.  
• Spurred by pent-up demand and record amounts of dry powder, PE sponsors doing business in an often-challenging environment continue to demonstrate creativity and agility by exploring alternative liquidity solutions and reassessing their deployment strategies.
• Amid slower traditional PE investing and longer hold periods, investors have leveraged opportunities for portfolio company add-ons, take-privates, co-investments and opportunistic transactions, as well as acquisitions of founder-owned private companies.
• Governments have increased their scrutiny of private equity transactions, reinforcing the importance of stepping up due diligence to comply with anti-bribery, competition, corruption and sanctions laws, national security issues and understanding the extraterritorial reach of relevant laws and regulations.

Outlook for Private Equity in 2025

The rise of non-traditional PE funds, major multi-strategy asset managers and alternative capital solutions

2025 will see growing competition in the PE space from non-traditional players such as sovereign wealth funds, pension plans and family offices, which are adopting a "control" or lead investor-type capacity on direct investments as they seek greater oversight, reduced fees and greater return on invested capital. The number of deals consummated by large, multi-strategy asset managers is also expected to rise, as these funds are outperforming in fundraising and may be better positioned to take advantage of opportunities in today's deal environment. As dealmakers look to stay agile amid shifting market conditions, investors are also anticipated to look beyond traditional leveraged buyouts to growth equity, preferred equity in partnership models, and other alternative capital solutions. 

PE sponsors expand into private credit 

With private credit increasingly used for fund-level financing, PE sponsors expanding their offerings into private credit can capitalize on their expertise and relationships to create synergies across different asset classes. Adopting multi-strategy diversification to enhance risk-adjusted returns and overall value creation presents myriad opportunities for PE sponsors in the current market. 

Growth of GP-led secondaries and NAV financing as alternative liquidity solutions

Once considered a last resort for underperforming funds, GP-led secondaries have quickly risen in popularity as a valid alternative liquidity option amid a slowdown in traditional exit strategies like mergers and acquisitions and IPOs. These will continue to be an attractive means of offering liquidity to LPs who are eager for returns despite longer hold times. Net asset value (NAV) financing has also emerged as a valuable tool, most commonly to support add-on acquisitions ─ a sponsor focus in a difficult exit environment. 

Regulators to intensify their focus on businesses and transactions 

Private equity faces a mounting compliance landscape that needs to be factored into all transactions. In November 2024, Dechert’s 2025 Global Private Equity Outlook report found that 66% of PE firms globally expect increased scrutiny from antitrust, FDI and other regulatory authorities to have a negative impact on their dealmaking plans in the 12 months ahead. In the U.S., following recent political developments, it remains to be seen whether antitrust enforcement will be wound back under a Trump administration. However, in light of regulatory changes and the expanding powers of the Committee on Foreign Investment in the United States (CFIUS), buyers should expect enhanced government scrutiny of foreign investments, particularly in deals involving the technology and defense sectors. The U.S. Government and Congress are also considering measures to review outbound investments from the United States for national security concerns, largely driven by concerns related to the flow of U.S. capital to countries including China. 

Environment, Social and Governance (ESG) matters are also high on the legislative agenda. In the UK, evolving ESG regulations will likely affect both the operation of and reporting by PE investments in future.

Sector Matter Highlights