PE Deal Value Reached $2.6T in 2025, Reports McKinsey
A McKinsey report shows that global private equity deal value increased by 19% to $2.6 trillion in 2025, largely driven by buyouts. The report notes that the outlook for 2026 is tougher. Separately, an analysis by Will Schryver demonstrates the sensitivity of LBO activity and IRRs to interest rates, with deal-making spiking during the low-rate period of 2019-2021.
- The increase in deal value was largely driven by a resurgence in "megadeals" (transactions over $10 billion) and take-private transactions, which accounted for their third-highest year ever in deal count and value. A notable example is the proposed $55 billion take-private of Electronic Arts by a consortium including Silver Lake and Affinity Partners. - The Technology, Media, and & Telecom (TMT) sector was a primary driver of deal value in 2025, attracting $654 billion in private equity investment globally. This was fueled by significant interest in AI, as seen in the $40 billion acquisition of data center operator Aligned Data Centers by a consortium including BlackRock and Nvidia. - In the Financial Institutions Group (FIG) sector, financial services saw a 61% increase in deal value for buyouts over $500 million in 2025. Dealmaking in the sector is expected to remain strong in 2026, with a focus on consolidation in banking and insurance. - Higher interest rates have led to a greater emphasis on operational value creation over financial engineering. With elevated entry multiples, averaging around 12x EBITDA in 2025, sponsors are focusing on revenue growth and margin expansion to drive returns, a shift from the previous reliance on multiple expansion and leverage. - The median private equity purchase multiple increased to 11.8x EBITDA in 2025 from 11.3x in 2024. In the TMT sector, private software valuations saw a slight quarterly decline but were up year-over-year, while IT services valuations rose. - On the sell-side, there is significant pressure for sponsors to generate liquidity and return capital to limited partners (LPs) due to a backlog of aging portfolio companies. This has led to an increase in sponsor-to-sponsor deals and a partial reopening of the IPO market for larger, high-quality assets. - The exit market showed signs of life with a more than 40% surge in the value of PE-backed exits globally, aided by a nearly 100% increase in exit deal volume via IPOs. However, this activity was concentrated in larger deals, with the middle-market remaining more stagnant. - For LBOs, higher financing costs have resulted in more conservative capital structures. In the middle market, equity contributions for buyouts eased to 46% of value in 2025, down from 51% in 2023, reflecting renewed confidence in credit markets.
