PE Market Shows Signs of Recovery After Three-Year Slump, Dechert 2026 Outlook

What's New

Dechert's 2026 Global Private Equity Outlook reveals that global buyout deal value reached $965.8 billion through Q3 2025, representing a 30% increase from the same period in 2024, signaling the PE industry is gradually emerging from nearly three years of constrained deal activity and challenging fundraising conditions despite ongoing tariff volatility and geopolitical uncertainty.

Why It Matters

The recovery trajectory has significant implications for the $3.6 trillion worth of unsold portfolio companies still held by GPs and the $1.2 trillion in dry powder awaiting deployment. LPs are increasingly focused on actual cash distributions (DPI) over paper returns when deciding whether to reinvest, making the unlocking of liquidity the industry's most pressing challenge heading into 2026.

Big Picture Drivers

• Liquidity pressure: GPs must offload 29,000 unsold portfolio companies worth an estimated $3.6 trillion while returning capital to investors who need distributions before committing to successor funds

• Geopolitical complexity: 49% of respondents cite geopolitical conflicts as a top deal environment factor, with EMEA particularly sensitive at 65% versus only 30% in APAC

• Alternative solutions: GP-led secondaries, NAV financing, and continuation vehicles are becoming essential tools as traditional exit channels remain constrained

• Retail capital emergence: 73% of respondents expect at least 10% of their next fund to come from non-institutional investors, signaling a structural shift in fundraising

• Sector specialization: 55% of GPs report investor preference for specialized strategies, with sector-focused funds delivering higher DPI than generalist vehicles

By The Numbers

• Q3 2025 buyout value: $415.8B, the strongest quarter since mid-2021

• Expected 2025 net returns: 17.1% industry-wide, up from 16.5% last year

• GP-stake divestitures planned: 77% of respondents, nearly double the prior year

• GP-led secondaries usage: 46% of respondents, almost twice last year's figure

• Private credit AUM: $3+ trillion globally, with continued growth projected

Key Trends to Watch

• Continuation vehicles surge: GP-led secondaries reached a record $47 billion in H1 2025 as managers seek alternatives to traditional M&A exits while maintaining exposure to top-performing assets.

• Fund finance expansion: 36% of respondents expect fund finance to increase in the next 12-18 months, with NAV financing projected to triple from $44 billion in 2023 to over $145 billion by 2030.

• Deal structure innovation: 48% of GPs favor earnouts to close valuation gaps, with extended hold periods becoming normalized as 87% of managers are comfortable holding assets for 10-15 years.

• Multi-strategy platforms: 64% of respondents are expanding into additional investment strategies to mitigate fundraising pressures, with private debt and infrastructure proving resilient.

The Wrap

The PE industry is navigating a gradual recovery rather than the dramatic rebound many anticipated, but the expansion of liquidity tools—from GP-led secondaries to NAV financing—combined with improving exit values and creative deal structuring positions well-resourced managers to capitalize on opportunities in 2026 while addressing the critical imperative of returning capital to investors.