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Rebound in dealmaking lifts buyouts and exits to second highest values on record, with a sustained upswing in prospect
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Industry reaches critical inflection point as intensified competition challenges funds to deliver differentiated strategies and high performance
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’12 is the new 5′ – Bain coins a rule of thumb capturing new math for a new era in PE
A resurgence in global private equity is gathering steam after a rebound in dealmaking last year that saw both buyout deals and exits surge ahead to register their second highest values on record. After three prior years in the relative doldrums, the advances mark a turning point for PE and set the stage for a continuing revival in 2026 and beyond, Bain & Company’s 17th annual Global PE Report, released today, concludes.
But Bain’s analysis tempers this upbeat message on brightening prospects, with a caution that the maturing PE industry has reached a critical inflection point. PE firms confront greatly heightened competition for capital as well as intensified investor demands for high performance – even as they continue to contend with a series of stubborn industry challenges, today’s report warns.
Even with last year’s leap in exit value, amounts of cash flowing back to limited partner (LP) investors continue to disappoint, hampering PE’s revitalization, Bain finds. The key measure of this, distributions to LPs as a percentage of net asset value (NAV), has now been mired below 15% for four consecutive years, setting an industry record. The industry’s liquidity logjam comes as it sits on a stock of 32,000 unsold companies worth a stunning $3.8 trillion, Bain notes. For buyout funds, holding periods at exit now hover at around seven years – up from an average of five to six years from 2010 to 2021. In turn, lagging distributions to LPs are the main driver of a slow and difficult slog faced by many PE firms in fund-raising, the analysis concludes.
Despite the challenges of these structural issues, as well as lingering economic uncertainties, today’s report charts how last year saw PE get moving once again as an industry recovery gained traction amid some of the biggest buyouts of all time.
Pent-up appetite among general partners (GPs) to get deals done and put to work a $1.3 trillion arsenal of global buyout dry power – much of it aging, along with falling interest rates, catalyzed a sharp rebound in deal and exit values, with confidence returning to credit markets. 2025 global buyout deal value (excluding add-ons) leapt 44% year-on-year to $904 billion. The $56.6 billion public-to-private deal for Electronic Arts (EA) set a new all-time buyout record.
Alongside, exits also rebounded, with global buyout-backed exit value jumping 47% year-on-year to $717 billion, led by a series of landmark exits, including Macquarie’s $40 billion sale of Aligned Data Centers to BlackRock and a consortium of tech giants hungry for AI data-crunching capacity.
However, while both buyout and exit values were the second highest ever, and not far behind those in PE’s zenith year in 2021 – and while the year also saw some of PE’s biggest-ever transactions – Bain’s report cautions that the 2025 recovery was also markedly narrow. Just 13 megadeals in the $10 billion-plus bracket accounted for $274 billion (or 30%) of the global total, with 11 of those deals being concentrated in the US.
“The good news is 2026 is shaping up as promising. Interest rates are moving south, if slowly, deal pipelines are well stocked. With stock prices high and the economy robust – and barring another ‘black swan’ jolt to the system – the conditions for deal and exit activity are rosier than for some time,” Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company, said. “Beneath the headline recovery, though, there is a more uneven underlying reality – and plenty of work still to do. Deal value has been highly concentrated in megadeals, favoring a few scale players. Many GPs continue to face pressures from longer holding periods, constrained distributions, and fund-raising conditions that are among the toughest the industry has experienced. With the tailwinds that propelled the industry forward in the 2010s gone, the dynamics mean that most players will have to substantially raise their value creation game.”
The changed dynamics challenging GPs that have made the PE business model significantly more complex to execute on than in the industry’s ‘golden decade’ of the 2010s are examined in detail in Bain’s report. While that period provided PE players with powerful tailwinds from rock-bottom interest rates, steadily rising valuation multiples, and ready access to investors and capital, Bain finds that today’s new baseline is higher rates, stubbornly high valuations, slower exits and much choosier investors. At the same time, PE firms’ costs are rising as leading firms build competitive moats through scale, expertise, technology and AI, and professionalized fund-raising.
Rebecca Burack, head of the global Private Equity practice at Bain & Company, said: “Against this backdrop, deal math is only getting harder. The industry is at an inflection point having reached a level of maturity that comes to all sectors, where competition intensifies and customers, in this case investors, demand a much higher degree of excellence. More than ever, investors are focused on funds that have a clear, repeatable, easily explained strategy for delivering top-tier results. In the new era we are entering, the performance that winning firms need to deliver will rely on their ability to rapidly generate strong EBITDA growth, full stop.”
New math for a new era: Bain sets out a rule of thumb capturing why ’12 is the new 5′ for PE
As a new cycle for PE gathers steam, with an upswing in dealmaking in a context where every aspect of raising capital and generating returns is more challenging, Bain sets out a rule of thumb to capture the implications for the industry that it calls “12 is the new 5”.
During PE’s ‘golden decade’ of the 2010s, based on typical deal pricing, capital structure and exit values, and with dealmakers benefiting from then substantial valuation multiple expansion, a typical PE investment required only 5% annual growth in earnings before interest, taxes, depreciation and amortization (EBITDA) to generate a target 2.5X multiple on invested capital (MOIC) over average five-year holding periods. This level of earnings would also deliver a 20 per cent internal rate of return (IRR).
Yet in today’s environment, with borrowing costs in the 8% to 9% range, leverage ratios of 30% to 40%, and purchase multiples in record territory, the lower leverage and lack of multiple expansion make value creation more challenging. In turn, Bain finds that typical deals now require around a 10% to 12% average annual growth in EBITDA to generate the same benchmark 2.5X return over five years.
The consequences of “12 is the new 5” mean that most PE funds will need to substantially raise their value creation game in these changed circumstances – with pressure intensified as LPs increasingly narrow their focus to the largest platforms and firms that are top-tier generators of alpha, Bain concludes. At the same time, firms’ costs to generate performance are being driven up by the need for heavy investments in specialized sector expertise, critical capabilities, technology and talent, while revenues to pay for these requirements are under pressure from falling management fees as well as LPs’ growing appetite for co-investment.
Rebecca Burack commented: “Generating attractive returns now requires significantly more operational improvement and revenue growth. We call this ’12 is the new 5′. In practical terms, deals that once delivered competitive returns with modest EBITDA growth now require sustained, double-digit growth. In PE’s new upcycle, the winners will be those for whom alpha generation is a habit, not an aspiration. The winning firms will be those that build true differentiation, whether through scale, specialization or superior execution, and turn that differentiation into a system, not a slogan, and one that is backed up by data.”
Bain’s report advocates that, increasingly, successful PE players will secure competitive advantage in the era where ’12 is the new 5′ by proactively identifying potential deal targets as far as years ahead of any deal. It also urges that, in the new era, firms that want to ensure robust value creation will need to focus on not only a viable deal case but on the true full potential of an asset through what Bain calls “full potential due diligence” that scrutinizes revenue, operational and technology levers that can deliver a step-change in a portfolio company’s performance.
A year of two halves puts PE in a new upswing, driven by a wave of megadeals
Charting PE’s 2025 upswing, today’s report notes that having begun last year with optimism, investors quickly regained their footing after the setback of turmoil around the US administration’s tariff announcements in April, with dealmaking then staging a potent rebound from Q3, which registered PE’s strongest quarter ever, with an impressive $301 billion in deal value.
But while deal value for the year was close to record highs – flattered by an average disclosed deal size that marked an all-time record of $1.2 billion – the number of buyout deals declined, falling by 6% year-on-year, to register 3,018 transactions. A wave of megadeals wowed the market and drove the steep jump in total deal value. In addition to the record $56.6 billion public-to-private deal for EA and the $40 billion deal for Aligned Data Centers were the $27.5 billion acquisition of Air Lease, the air leasing platform, and the $23.7 billion deal for Walgreens Boots Alliance, the retail pharmacy chain.
Yet Bain also notes that these huge numbers also belied relatively modest impact on the buyout industry’s $1.3 trillion mountain of dry powder, with the bulk of equity in many transactions coming from external sources, especially sovereign wealth funds and corporate buyers, rather than PE funds. After taking into account the extensive availability of such non-buyout capital, the amount of money chasing deals is unprecedented – and cutting into PE’s share of the action, the report finds.
Activity below the megadeal threshold was meanwhile more representative of the state of the buyout market amid macro uncertainties, Bain suggests. Excluding the $10 billion-plus deal segment, 2025 deal value grew 16% year-on-year, with transactions in the $5 billion to $10 billion range growing 6%, while the $1 billion to $5 billion segment grew 29%.
North America was by far the biggest driver of dealmaking, adding 80% to the deal value – although Europe made a comparable contribution if the megadeals above $10 billion are removed from the total. Deal value also rose across most sectors but deal count lagged almost across the board.
Public-to-private transactions continued to dominate the top-end of the market and represented roughly half the total deal value growth as GPs and their sovereign wealth and corporate investing partners took advantage of an improved financing environment for M&A in the US, and the opportunity to revamp companies out of the public eye.
Exits revival eases liquidity logjam but larger cash flow challenge persists
Last year’s sharp jump in exit value provided welcome relief for the PE industry from its stubborn liquidity challenge to sell enough companies to meet LPs’ demands for returns of liquidity to investors.
A global M&A boom spurred by improving economic conditions, shifting business requirements, and AI helped to drive the rebound in exits. But Bain also notes that just seven mega-exits each valued at more than $10 billion added $155 billion, or 22%, to the $717 billion global value of 2025’s exits, while the total number of exits fell slightly to 1,570 – a 2% drop year-on-year that left exit count broadly in line with the level just before the Covid-19 pandemic.
While exit activity was less pronounced across the broader market, exit value below the $10 billion threshold still grew by 34% as opportunistic buyers combed buyout portfolios for solutions to companies’ strategic imperatives. Sponsor-to-strategic exits, with sales to corporate buyers, regained importance. Exit value through this channel rose 66% year-on-year and even more strongly in North America (by 73%) and Europe (by 82%) – led by deals such as ECP’s $29.4 billion sales of Calpine, a US electricity generator, to rival energy group Constellation.
The sponsor-to-sponsor channel was less robust, growing 21% globally, boosted by the Aligned Data Centers deal, without which the value of North American sponsor-to-sponsor exits would have dropped 19%. There was offsetting strong growth in Europe, where sales to sponsors rose 56% year-on-year.
Initial public offerings globally increased 36% last year, from a very low base, and IPOs continued to provide only a minor exit route for PE, with GPs deterred from taking the option by complexity and the potential for macro turbulence to impact public markets. However, the reopened IPO window for exits raises the prospect of increased activity in the channel in 2026, Bain suggests.
Amid industry-wide concern over liquidity, secondaries and continuation vehicles continued to expand as exit channels last year. For secondary deals, the transaction volume of GP- and LP-led vehicles rose 41% year-on-year. GP-led continuation vehicles (CVs), allowing a fund to return capital to LPs while retaining control of the asset, grew even faster, by 62% year-on-year, marking 37% annual growth since 2022.
Although CVs still accounted for less than 10% of total PE exit value, GPs’ interest in these is growing: a quarter of respondents to a recent StepStone/Bain survey said they had initiated or completed a CV in the past two years, and around 40% said they planned to explore a CV transaction in the next 12 to 24 months. More than half of respondents said generating liquidity was a primary reason for launching a CV.
Overall, PE’s net cash flow moved modestly above the breakeven line last year, Bain finds. But with the key metric of distributions to LPs as a percentage of NAV still essentially flat at 14% for 2025 – a level not seen since 2008-09 during the global financial crisis – the report warns that PE’s liquidity challenge continues to dog the industry.
Fund-raising falls for a fourth consecutive year as competition for capital further intensifies
The continuing four-year-long drought in distributions to investors makes it unsurprising that PE funds continued to see fund-raising lag in 2025, Bain concludes.
Private capital broadly raised $1.3 trillion last year, roughly even with 2024 totals, and thanks largely to strong growth in infrastructure funds. But fund-raising for buyout, the industry’s largest category, dropped 16% to $395 billion. Meanwhile, the total number of funds closed fell 18% for the industry as a whole and by 23% for buyout – marking a fourth straight year of decline, with almost every fund category affected.
While Bain finds that a majority of LPs still expect to maintain or increase allocations to PE in coming years, it notes that investors are also increasingly constrained in making new commitments without cash flowing back to them from aging fund vintages. This is further reinforcing trends for LPs to gravitate to the largest, established GPs with consistent performance, and to become more demanding, with investors increasingly looking for top-quartile returns, alongside consistent, top-quartile cash distributions.
In turn, Bain concludes that these trends are adding to the imperative facing GPs to define and articulate a differentiated and repeatable strategy as well as to transform how this is communicated with professionalized investor relations.
Yet despite this intensified competitive pressure on funds, the report also concludes that PE’s value proposition remains appealing to investors. Top-quartile buyout funds continue to outperform public market averages significantly over all time horizons, Bain notes. A key appeal of PE for investors remains broader diversification across sectors and company sizes at a time when US equity markets have become extraordinarily concentrated, it adds.
Media contacts
To arrange an interview or for any questions, please contact:Dan Pinkney (Boston) — Email: dan.pinkney@bain.comGary Duncan (London) — Email: gary.duncan@bain.comAnn Lee (Singapore) — Email: ann.lee@bain.com
About Bain & Company
Bain & Company is a global consultancy that helps the world’s most ambitious change makers define the future.
Across 65 cities in 40 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition, and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster, and more enduring outcomes. Our 10-year commitment to invest more than $1 billion in pro bono services brings our talent, expertise, and insight to organizations tackling today’s urgent challenges in education, racial equity, social justice, economic development, and the environment. We earned a platinum rating from EcoVadis, the leading platform for environmental, social, and ethical performance ratings for global supply chains, putting us in the top 1% of all companies. Since our founding in 1973, we have measured our success by the success of our clients, and we proudly maintain the highest level of client advocacy in the industry.
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