Global private equity deal value climbed 19% to $2.6tn, while buyout activity reached nearly $1.8tn, its second-highest level on record, according to McKinsey’s Global Private Markets Report 2026.

Large transactions were the main reason behind the recovery. Buyout and growth deals above $500m surged 44% to $1.1tn, marking a record year for deals of that size. Megadeals above $2.5bn returned in force, including the announced $55bn take-private of Electronic Arts. Yet overall deal count fell 5%, highlighting a market where capital concentrated into fewer, larger assets rather than broad-based expansion.

North America led the rebound, with buyout value up 29% and accounting for 57% of global activity. Europe rose 8%, while Asia-Pacific declined 3%. Median buyout entry multiples climbed to 11.8x EBITDA, a new high, as sponsors competed for scarce, resilient assets.

But while transaction value recovered, returns deteriorated. Buyout funds underperformed public markets for the third consecutive year in 2025, generating approximately 7% versus 18% for the S&P 500 and 22% for MSCI World. Between 2022 and 2025, pooled buyout IRRs averaged 5.7%, representing a post-2002 trough.

The structural model that fuelled private equity outperformance over the previous decade has also weakened. Between 2010 and 2022, leverage and multiple expansion accounted for 59% of buyout returns. With entry multiples elevated and leverage less accretive, operational value creation must now carry a greater share of performance.

Liquidity remains constrained. Exit value rose 41% to $1.3tn, supported by a near doubling in IPO exit value to over $320bn. However, total exit count declined 15%, and holding periods lengthened further. More than 16,000 portfolio companies globally have now been held for over four years, representing 52% of buyout-backed inventory.

At the same time, fundraising has become more selective. Global closed-end private equity fundraising declined 17% to $616bn. North America rose 8%, but Europe fell 41% and Asia-Pacific declined 49%. Capital continues to concentrate into larger managers: funds above $5bn captured 35% of total fundraising in 2025, up from 28% in 2021, while sub-$500m funds saw their share fall to 13%.

Despite weaker short-term returns, LP conviction remains intact. Around 70% of LPs surveyed plan to maintain or increase private equity allocations in 2026. However, liquidity has moved to the centre of allocation decisions, with DPI now tied with MOIC as one of the most critical performance metrics.

Private equity has certainly rebounded in 2025, but the industry now operates in structurally tougher conditions. The  landscape is more competitive, capital-intensive and liquidity-constrained. And returns must be earned through disciplined underwriting, operational execution, as well as AI integration and a sharper GP differentiation.

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