PE Dealmaking Roars Back After Three Year Slump

What's New

McKinsey's Global Private Markets Report 2026 reveals that private equity dealmaking returned with force in 2025, ending a prolonged downturn that had gripped the industry since 2022. Total PE deal value reached $2.6 trillion globally, up 19% over 2024, with buyout and growth transactions exceeding $500 million surging 44% to top $1 trillion. The year also produced the largest buyout in history: the $55 billion consortium takeover of Electronic Arts.

Why It Matters

The recovery marks a turning point, but the road ahead is fundamentally different from the one that got PE here. The era of cheap leverage and multiple expansion that drove 59% of returns between 2010 and 2022 is over. With median purchase multiples climbing to 11.8x and average holding periods stretching beyond 6.5 years, firms that relied on financial engineering now face a market that rewards operational skill, disciplined underwriting, and strategic differentiation. The winners in the next decade will manufacture alpha through deliberate action, not favorable market conditions.

Big Picture Drivers

• Exits unlocked: For the first time since 2015, sponsor distributions to LPs exceeded capital contributions, with PE backed exit values rising more than 40% and IPO exits nearly doubling

• Megadeals returned: Transactions above $2.5 billion came roaring back, headlined by the Electronic Arts take private, signaling renewed appetite for large scale, complex dealmaking

• Liquidity innovation: GP led secondary transactions, primarily continuation vehicles, more than tripled in five years from $35 billion in 2020 to $115 billion in 2025, emerging as a permanent fixture of private markets infrastructure

• Consolidation accelerating: Strategic M&A among the 100 largest GPs nearly doubled from $18 billion to over $34 billion, as scale becomes a prerequisite for competitive fundraising

• Capital concentration: Funds below $500 million shrank to 13% of fundraising (down from 17% five years prior), while first time fund launches hit a decade low

By The Numbers

• $2.6T: Total global PE deal value in 2025, up 19% year over year

• 16,000+: Companies held in buyout portfolios for more than four years, representing 52% of total inventory, the highest share on record

• 6.5+ years: Average holding period for portfolio companies, roughly double the traditional target

• 8% vs 18%: Top quartile global buyout returns (pooled IRR) versus S&P 500 returns in the same period

• $55B: The Electronic Arts take private, the largest PE deal ever announced

Key Trends to Watch

• AI and infrastructure partnerships are reshaping capital deployment, with GPs announcing large multiyear deals focused on data centers, power infrastructure, and artificial intelligence capabilities across asset classes.

• Operational value creation is shifting from marketing narrative to institutional necessity, as the collapse of leverage driven returns forces firms to build genuine operating capabilities or cede market share.

• Private credit expansion continues to accelerate, with more than $620 billion in high yield bonds and leveraged loans approaching maturity in 2026 to 2027, creating massive refinancing opportunities for nonbank lenders.

• Take privates and carve outs are gaining favor as sponsors embrace deal complexity, seeking mispriced assets in public markets rather than competing over the same private portfolios.

The Wrap

The fog has lifted, but it has revealed terrain that is more technical and more demanding than what most GPs trained on. McKinsey's message is clear: the next generation of PE outperformance will not come from timing cycles or leveraging balance sheets. It will come from firms that build real operating muscle, deploy AI at scale, maintain entry price discipline, and treat longer holds as a feature of the new landscape rather than a bug. For institutional allocators evaluating manager selection, the question is no longer who can deploy capital fastest but who has the capabilities to compound value over extended horizons.