The private equity landscape in 2025 is at a juncture. After initial indications of a rebound in deal activity during the first quarter of the year, US tariffs have dampened recovery efforts, stalling momentum in global private equity markets. 

This mid-year review uses data from PitchBook and our in-house experts to distil key trends in mid-market private equity and provide insights to help you navigate today’s complexities and prepare for what’s next. 

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“The private equity sector is navigating some of the most dynamic market conditions we’ve seen in years. While global uncertainties and shifting geopolitical landscapes have slowed deal momentum, the enduring resilience of sectors like infrastructure, energy, and AI-driven industries demonstrates that opportunities still exist for those with the vision and agility to act. By remaining proactive and flexible, firms can position themselves to seize the next wave of growth as stability returns to the market.”
Peter Terry Head of Private Equity

Market conditions and activity: Uncertainty breeds inactivity

H2 2024 saw a 10% rise in deal volumes, driven by a budgetary rush that inflated Q4 activity and pulled deals into early 2025. However, this momentum has not carried through to H1 2025, as macroeconomic uncertainty and geopolitical risks continue to create a precarious environment.  

The deals market has historically had windows of high volume, and H2 2024 was one of those windows where dealmakers could make hay. Interest rates declined for the first time in over four years from 5.25% to 4.75%% over the course of the year, and inflation also eased significantly. These economic improvements, together with the impetus to transact before increases to capital gains taxes, created a more favourable environment for deal-making, making it easier to complete transactions.

This optimism, which carried through into early 2025, was an overhang from the strong prior year and created a sense of expectation that 2025 would maintain or even surpass that momentum. However, current geopolitical factors and business confidence have reduced such velocity.

Global uncertainties are dampening dealmaking momentum. Valuation gaps remain, deals are taking longer to close and fundraising while deploying capital into high-quality businesses has become increasingly challenging.

Despite this, certain sectors remain resilient. Professional services, energy, and data centres are benefiting from strong demand, driven by advancements in AI and digital transformation. Sectors that are less reliant on US markets are also gaining strong traction in UK markets to avoid potential US tariffs. Although the market remains optimistic and is sitting on record levels of uninvested capital (“dry powder”), confidence in deals with potential tariff exposure has suffered a significant short-term setback, as has US PE appetite for cross-border deals into the UK. 

Platform deals: Promise and pressures

Platform deals have declined by 5.5% year-on-year, which, while significant, is a smaller drop than in other areas of the market. This stems from strong sector-specific demand, such as a 42% rise in consumer product and service platform deals, which are supported by robust and resilient performance in service-oriented industries.  

The increase in consumer deals is tied to a shift in confidence in the economy and growing awareness among private equity firms of the strong performance of certain consumer assets. Trends built around health and wellness, whether they be in nutrition, travel and leisure or beauty, have sparked investor appetite, with many exploring opportunities before the market becomes too competitive.

Fierce competition for dry powder has intensified, as buyout funds struggle to deploy capital into high-quality, resilient businesses. This is compounded by the challenges of sourcing new funding amid a cautious dealmaking environment.  

Exit trends: Progress and pitfalls

Exit activity has dropped by 25% year-on-year, largely driven by uncertainty. Achieving successful exist requires a robust process, fostering strong competition among buyers and targeting those who are highly motivated. If market conditions are unfavourable as they are now, and buyers are reluctant, it may make sense to hold off on selling until conditions improve.

Continuation vehicles are increasingly being used as private equity portfolios retain high-performing assets for longer periods, providing firms with flexibility in uncertain market conditions while offering liquidity options for limited partners. An example of this was Inflexion closing its first multi-asset continuation fund at £2.3 billion, the largest in Europe. This move underscores the growing trend of continuation vehicles in private equity.

Notably, many private equity firms are choosing to hold onto assets longer, especially if they don’t urgently need to sell. This has contributed to an increase in average holding periods. For assets purchased in the last 2–3 years when valuations were particularly high, selling now could be challenging unless significant value creation work has been achieved. 

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“Macroeconomic uncertainty, geopolitical risks, and shifting sector dynamics are redefining deal-making, exit strategies, and investment priorities. While challenges persist, emerging opportunities in resilient sectors offer a path forward.”
Humza Khan Director, Private Equity Coverage

Key challenges in 2025 

Across the board, the single biggest barrier to deal execution is decision-making inertia. Geopolitical risks, ongoing tariff changes, and macroeconomic uncertainty are deterring both buyers and sellers from committing to transactions. Financing and due diligence are also more complicated in this environment, further hindering deal velocity. 

From a macroeconomic perspective, conditions in the UK are relatively stable. Interest rates are trending downward and are expected to drop further this year; inflation appears to be under control, and GDP growth, albeit low, remains positive and stable. The real issue lies in the geopolitical uncertainty, which creates anxiety and hesitation. Questions like “Will tariffs remain in place?” or “Where will negotiations lead us?” and “How will international conflicts impact global markets?” have led to a wait-and-see approach. 

The prolonged caution hanging over from early 2025 means that buyout funds are struggling to deploy their capital, with $1.2 trillion in dry powder according to Bain & Company. Declining exit activity is also leading to delays or reductions in returning capital to investors.  

Our analysis projects a 3% decline in deal volumes, though this may be an optimistic estimate as transaction delays push activity into late 2025 or 2026. 

Contact our private equity team to understand how these trends could shape your next move. Our experts can help you identify opportunities and navigate uncertainty with confidence.

Future outlook: Uncertainty, but optimism 

While the current environment may feel challenging, there is a sense that the market cannot remain at the same slow pace indefinitely, given the record amount of dry power available in the market. Deals will continue to happen out of necessity, and private equity firms are already adapting their strategies to align with the economic backdrop.

As the market moves into the second half of 2025, private equity funds have an opportunity to rebuild momentum by pursuing proactive dealmaking, conducting thorough due diligence, and refocusing on strategies that drive revenue and profit growth. 

From a strategic perspective, certain themes are emerging: 

  • Regulation and compliance sectors: Private equity interest in this space is growing as firms prioritise robust governance frameworks.
  • Consumer businesses with social capital: Firms are drawn to consumer-facing companies that align with sustainability and health trends.
  • AI-driven opportunities: AI is transforming how deals are executed and how portfolio companies operate. Investors are increasingly evaluating AI-related risks and opportunities during due diligence. 

The full timeline for recovery remains unclear, but there is cautious optimism that stability will return globally once geopolitical tensions ease. Sectors such as infrastructure, professional services, AI and energy are expected to continue leading the way as the market recalibrates. 

Should geopolitical tensions ease and inflationary pressures stabilise, the market could see a rebound in activity by early 2026. 

What should you do next? 

The importance of being nimble and ready to act is clear. When windows of opportunity open, firms must have done their groundwork to act quickly. Firms that can navigate this uncertainty while remaining forward focused will be best positioned to capitalise on the eventual market recovery. Here’s what you can do: 

  • Prepare for a prolonged period of volatility and adjust your strategies to maintain flexibility.
  • Identify opportunities in resilient sectors, such as infrastructure, energy, professional services, and AI-driven industries, while preparing for geopolitical shifts.
  • Refocus on long-term value creation and strategies that drive revenue and profit growth, such as digital transformation and market diversification.
  • Rebuild momentum through proactive dealmaking and rigorous due diligence, including consideration of bolt-on strategies.
  • Stress-test your portfolio against geopolitical and macroeconomic risks to identify vulnerabilities.

For more insight and guidance, contact our team.

Peter Terry's headshot
Peter Terry
Head of Private Equity
Manchester
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Humza Khan
Humza Khan
Director, Private Equity Coverage
Manchester
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Lucy Orhnial
Lucy Orhnial
Partner
London
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Amo Anim-Addo headshot
Amo Anim-Addo
Partner, Private Equity Coverage
London
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