Private equity rebounds in 2025 with record deal and exit values but faces new challenges in 2026

The private equity industry swung back into life in 2025, with global buyout activity and exits surging to near‑record levels, yet industry analysis warns that the era of easy returns fuelled by rock‑bottom interest rates has ended.

According to Bain & Company’s Global Private Equity Report 2026, buyout investment climbed sharply to about $900 billion last year, a rise of roughly 44% on 2024 and the second‑largest annual total on record. Exit activity also recovered strongly, with exit value supported by buyouts reaching $717 billion, up some 47% year on year and likewise the second highest on record. Bain’s 17th annual report frames 2025 as a turning point: dealmaking returned after a period of sluggishness, but the firm cautions that heightened competition, tougher LP expectations and the cessation of decade‑long monetary tailwinds require managers to lift their underwriting and value‑creation capabilities.

“Portanto, que 2025 tenha sido um ano bom, ou o segundo melhor da história, é uma notícia muito boa para a indústria. Ou seja, há aqui uma criação do momento bastante mais positivo,” Álvaro Pires, partner at Bain & Company, told Jornal Económico, explaining how accumulated dry powder was deployed last year. He noted that available but uninvested capital fell as managers called commitments into new deals, and pointed to improved IPO windows in the United States and a stabilisation in borrowing costs as contributors to the rebound.

The recovery was uneven by sector and geography. Bain highlights healthcare as a standout: dedicated healthcare private equity reached a record deal value in 2025, with Bain’s sector report placing global healthcare buyouts at roughly $191 billion, driven by an increase in transactions above $1 billion and strong activity in biopharma, providers, healthcare IT and medtech. The healthcare exit pipeline also strengthened, with sponsor‑to‑sponsor sales rebounding and exit value projected at about $156 billion, according to Bain’s healthcare analysis.

Europe’s rebound followed a different pattern. Bain reports buyout deal value in Europe of about $235 billion and exits of roughly $240 billion in 2025, with growth concentrated in the DACH and Nordic regions and in sectors such as healthcare, utilities and energy. By contrast, technology investment in Europe contracted, reflecting investor caution around rapid technological substitution and the potential impact of AI on future revenue models. Valuation multiples in Western Europe remained near 11x, and European dry powder stood at approximately $325 billion, above the five‑year average but unevenly distributed among vintages.

Despite stronger headline figures, liquidity remained a principal weakness. Bain notes that distributions to limited partners (LPs) stayed below historical norms, around 15% of NAV for a fourth consecutive year, extending average hold periods to nearly seven years for many buyouts. The firm warns that while longer ownership can lift multiples on invested capital through operational improvement, internal rates of return tend to decline after the sixth or seventh year unless value creation is accelerated early in the investment.

Other industry studies corroborate the broader upswing while offering additional perspective. McKinsey’s Global Private Markets Report 2026 records a sizeable rebound in private equity deal value in 2025, with buyouts accounting for a large share of overall growth and sizeable increases in deals above $500 million and above $2.5 billion. KPMG’s Pulse of Private Equity likewise found that private equity investment reached a four‑year high in 2025, with top‑end transactions powering the recovery and Japan emerging as a notable bright spot within Asia‑Pacific even as China’s activity cooled.

The rise in mega‑transactions was particularly pronounced in the United States, where several large public‑to‑private and cross‑border deals skewed global totals upward. Bain’s global report emphasises that this concentration of value in very large deals has created an uneven picture: a handful of large players and transactions accounted for a disproportionate share of the headline recovery.

Fundraising dynamics also remain strained. In Europe, fundraising for buyout strategies contracted sharply as weak distributions constrained LP capacity to re‑commit, even as aggregate capital raised across all private equity strategies ticked up modestly. Bain stresses that the industry faces a structural shift: with the support of ultra‑low rates gone, managers must demonstrate differentiated strategies and reliable value‑creation playbooks rather than depend on financial leverage.

Looking ahead, Bain struck a cautiously optimistic tone for 2026. “A boa notícia é que 2026 está a revelar‑se promissor. As taxas de juro estão a descer, ainda que lentamente, e os pipelines de negócios estão bem abastecidos. Com os preços das ações elevados e a economia robusta , e salvo outro choque inesperado do tipo ‘cisne negro’ , as condições para a atividade de negócios e saídas são mais favoráveis do que têm sido há algum tempo,” Hugh MacArthur, chairman of Bain’s global private equity practice, said in the report. Complementary M&A research by Bain points to a backlog of sponsor‑owned assets approaching fund maturity and to broad executive intent to sustain or increase deal activity in 2026, while KPMG and McKinsey flag improved exit prospects if market momentum endures.

For countries such as Portugal, Bain’s partners see opportunity as international buyers broaden their search for scalable assets. Álvaro Pires observed growing interest from cross‑border funds in Portuguese targets, citing examples of local platforms attracting sizeable outside capital. Nonetheless, Bain underscores that not all managers or geographies will benefit equally from the recovery: success in the coming years will hinge on disciplined deal selection, operational expertise and the capacity to adapt to a higher‑cost capital environment.

In sum, 2025 delivered a pronounced rebound for private equity, reinvigorating activity, lifting deal and exit values and reviving IPO channels in some markets, but the industry’s comfortable era of leverage‑fuelled gains has waned. Managers and investors must now rely more on operational improvement, strategic differentiation and sharper underwriting if private equity is to replicate the stellar returns of the past decade in an environment where liquidity and financing conditions are less forgiving.