Private Markets Hit Inflection Point Heading Into 2026 | McDermott Will & Schulte Outlook

What's New

McDermott Will & Schulte's fifth annual Private Markets Update reveals a market at a turning point: Q3 2025 saw private equity deal values hit a record $310 billion—the busiest quarter since 2020—signaling that the valuation standoff between buyers and sellers is finally breaking. After two years of muted activity driven by election uncertainty and trade policy shifts, appetite to transact has returned as the policy backdrop clarifies, setting the stage for accelerated exit activity, stronger fundraising, and sponsor-driven M&A in 2026.

Why It Matters

The $13 trillion private markets industry is reshaping how capital flows through the global economy. With public company listings declining while PE-backed companies multiply, and governments actively pushing to open retirement accounts to private investments, 2026 may mark the moment when private markets shift from an institutional asset class to a mainstream allocation—with profound implications for how businesses access capital, how investors build portfolios, and how wealth advisors serve clients.

Big Picture Drivers

• Structural shift: More companies are staying private longer, with PE-backed companies now outnumbering public companies in the US, expanding the opportunity set for private capital deployment.

• Democratization acceleration: Evergreen fund NAV topped $400 billion in 2025, and US 401(k) plans will gain access to private markets in August 2026, opening massive new capital pools.

• Credit dominance: Private debt fundraising is on track for a record year at $252.7 billion through Q3 2025, as borrowers increasingly prefer debt funds over traditional lenders.

• Infrastructure demand: AI-driven data center buildout and government infrastructure priorities pushed transport and infrastructure deals to $126 billion through Q3—a three-year high.

• Alternative exits: With traditional exits constrained, sponsors turned to continuation vehicles and dividend recapitalizations to generate LP liquidity while holding quality assets longer.

By The Numbers

• $20 trillion: Projected private markets AUM by decade's end, up from $13 trillion today

• $310 billion: Record Q3 2025 PE deal value, highest since Q1 2020

• $252.7 billion: Private debt capital raised through Q3 2025, surpassing 2021's record pace

• $6.33 billion: Sports and sports services deal value in first nine months of 2025, exceeding all prior full-year totals

• 421 transactions: European private debt deals in H1 2025, the busiest first half ever recorded

Key Trends to Watch

• Credit secondaries emergence: Secondaries strategies captured 16% of private debt fundraising in 2025—the first year they've claimed such a significant share—as four funds closed above $5 billion.

• Carve-out momentum: Q2 2025 delivered $15 billion in PE-backed carve-outs as corporates divest non-core operations amid trade, energy transition, and AI disruption.

• Sports investing surge: League shareholding rule relaxations are expanding the sports investor base beyond ultra-high-net-worth individuals to include PE firms, athletes, and tech investors targeting IP monetization.

• European credit strength: Average European private credit deal size jumped to €205 million in H1 2025, up 38% from €149 million in 2024, as the market scales rapidly.

The Wrap

The 2025 logjam is breaking. As policy uncertainty fades and the valuation gap narrows, private markets participants should position for an acceleration in deal activity, with carve-outs, infrastructure, and credit strategies offering the clearest near-term opportunities—while the democratization wave transforms who invests and how capital is structured for the long term.