McKinsey 2025 Private Markets Report: Industry "Emerges From Fog" With $2T Deal Surge

What's New: According to McKinsey's Global Private Markets Report 2025, private equity emerged from a two-year slump with global dealmaking reaching $2 trillion in 2024, marking a 14% increase and the third-most-active year on record.

Why It Matters: This rebound signals a significant shift in market confidence, with private equity firms finally overcoming challenges from high interest rates and economic uncertainty that had constrained activity since 2022.

Big Picture Drivers:

• Liquidity: First time since 2015 that sponsor distributions to limited partners exceeded capital contributions

• Credit: More benign lending environment with declining buyout financing costs and doubled new-issue loan value

• Confidence: Entry multiples increased after 2023 decline, indicating renewed market appetite

• Innovation: GPs exploring alternative capital sources through managed accounts, co-investments, and retail channels

• Tech Focus: Technology sector maintained strong performance as third-highest year for tech deal value

By The Numbers:

• 14% increase in global PE dealmaking to $2 trillion

• 24% decline in traditional fundraising to $589 billion

• 37% growth in large deals (>$500M) by value

• 45% surge in secondaries transaction value to $162 billion

Geographic Insights:

• North America: Led the rebound in large buyout transactions with strong deal activity

• Europe: Saw 65% increase in public-to-private deals, with growing US sponsor participation

• Asia: Experienced broader decline across fundraising, performance, and deal activity

• Cross-Border: Increasing focus on geopolitical risks and tariff considerations in deal-making

Asset Class Insights:

• Buyouts: Best performer with 4.5% IRR through Q3 2024

• Growth Equity: Second-strongest returns at 4.2% IRR

• Venture Capital: Struggled with 1.9% IRR and continued decline in deal count

• Secondaries: Record year with $162B in transaction value, up 45%

Key Trends to Watch:

• Public-to-private deals are accelerating, with Europe seeing a 65% year-over-year increase.

• Midmarket funds ($1-5B) demonstrate resilience while mega-funds struggle with fundraising.

• Portfolio company aging continues, with 61% of buyout-backed assets held over four years.

• Operational improvements become critical as multiple expansion opportunities diminish.

The Wrap: Despite ongoing challenges in certain segments, private equity's rebound demonstrates the industry's adaptability and innovation in response to market pressures, setting the stage for continued evolution in investment strategies and value creation approaches.

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