European PE Market Stalls as Trump Tariff Threats Disrupt Deal Flow, PitchBook Report Shows

What's New

European private equity deal value dropped 10.5% quarter-over-quarter in Q2 2025 as sponsors worldwide hit the pause button following US President Donald Trump's tariff announcements in April. According to PitchBook's European PE Breakdown, the market showed resilience in deal count, which rose 3.1% QoQ, thanks to a pickup in activity toward quarter-end as European central banks maintained monetary easing trajectories.

Why It Matters

The tariff-induced volatility represents a critical inflection point for European PE, with over 13,000 portfolio companies—42% held for more than five years—creating unprecedented pressure for exits. This backlog of mature assets, combined with the worst mega-exit environment since 2019, is forcing GPs to recalibrate strategies while LPs demand distributions in an increasingly constrained liquidity environment.

Big Picture Drivers

• Geopolitical uncertainty: Trump's "Liberation Day" tariff threats created market volatility that sponsors couldn't price effectively

• Monetary divergence: European central banks cut rates multiple times while maintaining easing stance, contrasting with US policy uncertainty

• Exit market breakdown: Deal-to-exit ratio jumped to 2.8x from 2.2x in 2024 as liquidity channels remained blocked

• Portfolio aging: Median holding periods extended from 2.7 years in 2018 to 3.6 years in 2025, creating distribution pressure

• Cross-border dynamics: US investor participation in European deals increased to 19% of count and 34.3% of value, highest since 2022

By The Numbers

• €126.5 billion: Q2 2025 European PE deal value, down 10.5% from Q1

• 2,063 deals: Q2 deal count, up 3.1% QoQ despite value decline

• 50%: Share of deals that were add-on acquisitions, reflecting sponsor caution

• €54.2 billion: H1 2025 fundraising total, with middle-market funds capturing 75% of 2024's full-year amount

• €5.3 billion: Largest fund closed YTD, suggesting tapering of mega-funds

Key Trends to Watch

• Sponsor-to-sponsor exits have become the dominant exit route in Europe, reversing the historical trend where corporate acquisitions led, as PE firms leverage dedicated M&A teams for faster execution.

• Healthcare sector consolidation is accelerating with H1 2025 deal value up 40.8% year-over-year, driven by demographic tailwinds and defensive characteristics.

• UK market resurgence shows 21.9% QoQ deal value growth despite new carried interest taxation, bolstered by early US trade deal negotiations.

• Middle-market fundraising recovery is outpacing large funds, with follow-on vehicles closing at significant step-ups as GPs focus on operational discipline over growth-at-all-costs strategies.

The Wrap

European PE stands at a crossroads where geopolitical headwinds meet fundamental structural pressures. While tariff volatility created short-term disruption, the underlying dynamics—massive dry powder, aging portfolios, and constrained exits—suggest sponsors must innovate on both deployment and liquidity strategies. The market's ability to navigate this period will determine whether 2025 becomes a reset year or a prolonged adjustment cycle.

Read Full Report: PitchBook Q2 2025 European PE Breakdown