Industry Trends
Private equity 2025: A trend report
The Private Equity Trend Report 2025 by PwC highlights the resilience of the European PE sector amidst economic volatility and geopolitical uncertainties in 2024. The number of deals increased by 3.3% to 3,975, and deal volume surged by 23% to €342 billion, driven by lower inflation and interest rates. The DACH region underperformed, with a 6% drop in transactions but a slight increase in volume to €56.9 billion. Despite challenges, Germany remains attractive, with 58% of PE firms having investments there and 98% planning to continue investing over the next five years.
The TMT sector led in deal count and value, with 2,229 deals worth €153.7 billion. The industrial and chemical industries and business services followed. Germany accounted for 11% of European PE transactions, ranking fourth by deal count but second by value at €65.3 billion. Major deals included the €13.4 billion buyout of Nord Anglia Education and the €10.1 billion joint venture for Intel's Fab 34.
Digital transformation is crucial, with 83% of respondents emphasizing its importance for future returns. In 2024, 71% invested in digitalization, and 72% plan to do so in 2025. AI is widely used, with 88% employing it for investment evaluation. Sustainability remains a priority, with 96% having an ESG policy and 97% considering sustainability in investment decisions. Despite economic challenges, the PE sector is optimistic, with 46% planning to increase investments in 2025 and 56% expecting an improved market environment.
Source: PWC
Asia-pacific private equity landscape 2025
In 2024, private equity investors in the Asia-Pacific region saw signs of recovery after a two-year slump despite global market turbulence. Deal value increased by 11%, although deal count fell by 9%, with larger average deal sizes and a 50% rise in megadeals. The recovery varied across countries, with a notable shift in focus from China to other markets. Investment in non-technology sectors like communications and financial services grew, while technology and cloud services lost share. The number of active investors dropped by 10%, but India saw a 29% increase in active investors, boosting deal count and value.
Deal multiples rebounded, with the median deal multiple rising to 12.8 from 10.3 in 2023. Exit values and counts stabilized after two years of decline, with Japan leading in mega exits. However, only 35% of fund managers met or exceeded their planned exits. Global fund managers expanded their portfolio operations teams by about 10% to address aging portfolios.
Corporate carve-outs gained attention, with the median multiple on invested capital (MOIC) for carve-outs between 2015 and 2021 at 1.4x, similar to all PE deals. Carve-outs aim to unlock value through sharper strategies, capital injection, and efficient operations. Successful carve-outs require careful planning to manage interdependencies with parent companies and often involve significant operational changes and leadership adjustments. Generative AI and other technologies have streamlined operations and boosted efficiency. Despite challenges, deep expertise and active management can lead to top-tier results in carve-outs.
Source: Bain & Company
Market Sentiments
Private equity outlook 2025: Is a recovery starting to take shape?
The private equity industry has faced significant challenges in recent years, reminiscent of the global financial crisis. However, dealmaking has shown signs of recovery, driven by a better macroeconomic environment and easing central bank rates. Investments and exits have increased, reflecting general partners' (GPs) eagerness to complete deals. Despite this, global M&A activity remains slow due to ongoing uncertainty around inflation, interest rates, and tariffs. Fundraising has not kept pace with the industry's growth, leading GPs to use various strategies to return capital to investors and manage cash flow deficits.
The deal value has surged, with North America and Europe significantly increasing, while Asia-Pacific experienced modest growth. The average deal size globally reached $849 million, with large deals dominating the market. Debt ratios have remained below pre-pandemic levels despite increased syndicated loan volume. Co-investment volume has risen, and institutional investors are expanding their capabilities to keep up with the market.
The industry faces a liquidity challenge, with capital returned to investors lagging behind the increasing scale of private equity. Partial realizations have become more common, and secondaries have grown as a tool for generating liquidity. Fundraising has seen a decline in the number of funds and average fund size, with a notable increase in the time taken to close funds. The top funds continue to capture a significant share of capital, and competition for deals remains fierce. The future success of funds will depend on their ability to demonstrate a consistent value creation model and a clear long-term growth strategy.
Source: Bain & Company
The resurgence of private equity infrastructure investment
In response to recent challenges, private infrastructure funds are broadening their mandates, seeking new investment capital, and enhancing operations. Despite a significant drop in investment activity in 2024 compared to 2022, infrastructure assets under management hit a record $1.3 trillion, with fundraising up 14% from 2023. To sustain recovery, funds attract capital from retail investors and offer more differentiated risk/return profiles, including investments in next-generation infrastructure. Although the macroeconomic environment remains uncertain, the need for investment in energy, transport, digital, and social infrastructure suggests potential growth.
In 2024, infrastructure assets under management increased by over 8%, driven by $87 billion in funds raised. However, dry powder declined 9%, and dealmaking fell 8%. LPs' average allocation to infrastructure rose to 2.1% in 2023, with most expecting stable or increased allocations in 2024. Europe and North America dominate geographically, with energy and environment sectors comprising half of all assets. Transport and logistics investments fell by 44%, while digital infrastructure saw significant declines in deal volume. Social infrastructure remains the least active sector.
Funds are launching new, sector-specific funds and consolidating to attract a broader range of LPs. Multiasset managers are acquiring infrastructure specialist funds, and established investors are increasing their Assets under Management (AuM) through acquisitions. Retail investor capital is being raised through vehicles with lower minimum investments and enhanced liquidity. Operational excellence is a focus, with detailed value creation blueprints and target operating models being developed to improve efficiency and financial performance.
The outlook for 2025 and beyond is positive. Stabilized interest rates and growing momentum for fundraising and deal activity will ensure the infrastructure's continued relevance and appeal.
Source: BCG
Private equity's strategic shift: Fossil fuels over renewables
Global private equity and venture capital investments in fossil fuels are gaining momentum as significant oil and gas companies streamline their portfolios and divest assets. In 2024, private equity investment in fossil fuel companies surged 131% year over year to $15.31 billion, while renewables saw a 64% increase to $25.91 billion. The last two quarters of 2024 saw strong momentum, with $10.17 billion invested in oil and gas, surpassing the $5.14 billion in renewables.
Large oil and gas companies' asset sell-offs are driving private equity acquisitions in both sectors. However, the continuation of this momentum in 2025 is uncertain. In January and February, oil and gas deals reached $930 million across 11 deals, compared to $3.07 billion from 10 deals in renewables. The demand for energy from the generative AI industry, which cannot rely on weather-dependent renewables, is also putting a spotlight on fossil fuels.
Top oil and gas deals in early 2025 included KKR & Co. Inc.'s $615.6 million acquisition of a 5% stake in Enilive SpA and Brookfield Asset Management Ltd.'s $281.6 million investment in Infinium Holdings Inc. TPG Global LLC proposed a $2.34 billion buyout of Altus Power Inc. in renewables. Stoa SA and EDF Brasil Holding SA acquired Geração Céu Azul SA for $248.2 million.
Climate tech deals have slowed, with $560 million across 26 deals in early 2025, continuing a decline from $16.38 billion in 2021. The most significant climate tech deal was a $160 million series B round for Chestnut Carbon LLC. Policy uncertainty, particularly in the US, is a substantial driver in energy markets, affecting the stability of the global energy industry.
Source: S&P Global
26% decline in global private equity, venture capital funding
In February 2025, global private equity and venture capital-backed funding rounds continued to decline, with the total amount raised dropping to $15.9 billion, a 26% decrease from January, according to S&P Global Market Intelligence data. Year-over-year, deal value also fell by 23% compared to $20.63 billion in February 2024. The number of funding rounds decreased to 1,014 from 1,186 in the same period last year. Through February 2025, the aggregate amount raised was $37.28 billion, a 30.2% year-over-year decline, and the number of rounds fell to 2,336 from 2,568.
The technology, media, and telecommunications (TMT) sector remained the most invested in February, receiving 48.9% of total investments, amounting to $8.27 billion across 431 rounds. The healthcare sector followed, representing 22% of aggregate investments and raising $3.7 billion. Within TMT, application software companies recorded the most investment rounds at 251, down from 295 deals in February last year, followed by systems software companies with 47 rounds.
The most significant funding round in February was for healthcare equipment company Connecteve Co. Ltd., which raised $1.92 billion from multiple investors, including Big Move Ventures and BSK Investment. The second largest round was for unmanned surface vehicles manufacturer Saronic Technologies Inc., which raised $600 million from investors such as 8VC and Andreessen Horowitz LLC. AI-powered robotics company Apptronik Inc. secured the third largest investment round with a $350 million series A round co-led by B Capital Group Management LP and Capital Factory.
Source: S&P Global
The rise of growth lending in private credit markets
In the face of market instability, institutions are broadening their alternative exposure, with the addressable market exceeding US$30 trillion. Growth lending, a subset of direct lending, is a key option, providing privately originated debt to venture-backed, late-stage, high-growth companies. In 2024, the US saw a record $53 billion in venture debt, driven by a lending gap post-Silicon Valley Bank collapse and a decline in VC equity funding. Growth lending focuses on mature private companies in sectors like life sciences, healthcare, and technology, which have defensible value through intellectual property or market share. These loans typically have low loan-to-value ratios and involve multiple disbursements based on milestones to prevent overleveraging. Growth lenders emphasize company fundamentals, enterprise value, and sponsors, with a process similar to equity underwriting. The loans often have a maturity of five years but are prepaid in less than 36 months, enhancing returns. Key covenants include minimum liquidity and performance metrics. Investors should seek borrowers with resilient business models, established management, strong unit economics, and consistent growth. Managing growth lending requires specialized lenders with deep market knowledge. Wellington Management, for example, leverages over a decade of private equity experience and a robust team of investment managers and analysts to underwrite risks and opportunities, ensuring high credit quality and upside potential. This approach includes deriving independent valuations and incorporating protective covenants. The potential for attractive risk-adjusted returns and less-dilutive capital solutions makes growth lending a compelling asset class.
Source: Asian Investor
Market Opportunity/Challenges
Private equity in emerging Markets: Strategic insights and challenges
Jeff Bartel, chairman and managing director of Hamptons Group, highlights the growing appeal of private equity investment in emerging markets, driven by rapid urbanization, economic growth, and new industries. Key regions include Latin America, Southeast Asia, and parts of Africa, characterized by faster GDP growth, an increasing middle class, and favorable demographics. Sectors with high investment potential include healthcare, technology, infrastructure, and energy, particularly renewable energy. Hamptons Group has successfully invested in infrastructure, housing, and transportation projects, recognizing their importance for sustainable economic development.
However, investing in emerging markets has risks like instability, political changes, and regulatory challenges. Investors are advised to develop risk management strategies, conduct thorough market analyses, and understand local political environments. Partnering with local experts and having exit strategies can mitigate these risks.
Environmental, social, and governance (ESG) considerations are increasingly crucial in investment strategies. Hamptons Group incorporates ESG principles, focusing on renewable energy and sustainable agriculture, which deliver financial returns and societal benefits. ESG-aligned investments can enhance investor confidence, provide easier access to international funding, and build trust.
Future trends in emerging markets private equity include advancements in digital technology, with opportunities in e-commerce, fintech, education, and healthcare. ESG investments are expected to yield strong financial returns and support the development of underserved markets. Private equity firms that identify these opportunities, adhere to ESG practices, and build local partnerships will likely succeed. The information provided is not investment advice; consulting with a licensed professional is recommended.
Source: Forbes
Future Outlook
The future of the $3 Trillion private credit market
Private credit has become crucial to global finance, showing resilience and adaptability amid economic challenges. The tenth edition of the Financing the Economy report by the Alternative Credit Council (ACC) and EY Luxembourg highlights the sector's growth, with assets under management exceeding $3 trillion globally. In 2023, private credit funds deployed $333.4 billion in new capital, up from $203 billion in 2022, indicating structural and permanent growth. Banks' retrenchment has allowed alternative lenders to fill the financing gap, particularly in Europe, which now accounts for 30% of the market.
Corporate lending remains the backbone of private credit, but there is significant growth in asset-backed lending, real estate debt, and infrastructure debt. Political support for initiatives like the Capital Markets Union and regulatory changes like AIFMD 2.0 and ELTIF 2.0 have facilitated European market expansion. Future growth drivers include increasing demand for private investment in infrastructure and green energy, with estimates suggesting up to $300 trillion needed by 2050.
Investor interest remains strong, with institutional and sophisticated investors seeking yield. There is also a growing trend towards retail investor participation, especially in the US and Europe. Transparency is a key concern, with most managers providing regular portfolio updates. The report shows an increase in loan term adjustments, reflecting prudent risk management.
Overall, private credit is a transformative force in global finance, meeting the needs of borrowers and investors through innovative strategies and regional expansion. The sector is poised to continue thriving and reshaping capital flows worldwide.
Source: EY
2025 forecast: Private credit market set for remarkable growth
Global M&A is recovering from a ten-year low, with deal volumes growing 7% and values increasing 15% to $US3.5 trillion last year, nearing pre-pandemic levels. Despite challenges like slow interest rate reductions, valuation gaps, and geopolitical uncertainty, optimism for a rebound in 2025 is high. Bill Eckmann of Macquarie Capital notes growing confidence among dealmakers and pent-up demand driving market momentum. This renewed activity is boosting private credit, an alternative asset class that has matured significantly, surpassing $US3 trillion in global assets under management. Private credit has become a permanent fixture in corporate lending, driven by secular shifts and repeat business from an expanding borrower base. The asset class offers borrowers efficiency, certainty, and flexibility while providing investors with ongoing income, portfolio diversity, and capital use flexibility. Macquarie Capital's Principal Finance team has seen its private credit book grow by over 50% in three years, driven by expanding client coverage and a shift from public to private capital. The firm leverages its global network and deep market knowledge to support clients across sectors like software, tech-enabled services, insurance, and infrastructure. Macquarie Capital is partnering with Macquarie Asset Management to diversify its capital base and offer middle-market direct lending opportunities. Despite market uncertainties, optimism for private equity dealmaking remains high, with significant growth opportunities expected across various sectors. Macquarie Capital is well-positioned to support clients in capitalizing on these opportunities, with private credit anticipated to be a substantial contributor to its business in the coming years.
Source: Macquarie
Others
Understanding private markets and asset allocation
The challenges of estimating returns and volatility for private market asset classes emphasize the need for careful handling of assumptions and the limitations of historical data. It proposes a "public-plus-premium" approach, adding an illiquidity premium to public equity return expectations, though the extent of this premium varies widely across research. The significant changes in private markets, such as growth in size, structure, and investor base, impact the risk and return. The absence of robust benchmarks for private market returns and volatility has become significant as investors allocate more to illiquid investments like private equity, private credit, and infrastructure. Conservative estimates may pose risks, while overly conservative assumptions could limit exposure to important asset classes. Private equity now represents about ten percent of total public equity market capitalization, up from less than five percent in 2010, with similar growth in unlisted infrastructure and private credit. Researchers face challenges in compiling and adjusting historical data for factors like de-levering, size, and value, as well as creating LP-centric forms that reflect accurate, risk-adjusted, net-of-fee returns. The recent changes in private markets, such as rapid growth, declining IPO activity, and shifts in GP exit strategies, undermine the validity of historical data for analysis. The Bfinance Global Asset Owner Survey (November 2024) indicates that nearly half of investors expect a reduced long-term illiquidity premium. It underscores the importance of validating private market incorporation within asset allocation and maintaining governance over these decisions. It also aims to support investors in asset allocation decision-making for private markets, emphasizing appropriate governance and ownership of decisions, regardless of delegation.
Source: BFinance
