Global M&A trends for private equity and principal investors

From reset to rebound: what’s really driving the next wave of private equity deals.

The M&A outlook into 2026 for private equity and principal investors continues to improve, even as market conditions remain volatile. After several years of uneven dealmaking, confidence is returning as financing conditions stabilise and concerns around interest rates and tariffs begin to ease. While uncertainty linked to macroeconomic trends, policy risk, and technology disruption persists, private capital is demonstrating its willingness to pursue larger, more complex transactions.

A combination of forces is shaping this recovery. Megadeals are re-emerging as sponsors and principal investors pursue opportunities where conviction is high and assets offer clear value creation pathways. Secondary markets are providing an increasingly important source of liquidity, helping general partners (GPs) manage holding periods and recycle capital. While fundraising remains under pressure, larger private equity funds continue to pull ahead, with megafunds raising more capital and making it harder for smaller managers to compete without a clear niche. 

At the same time, AI has moved from a thematic investment opportunity to a defining influence on private capital strategy, affecting both where capital is being deployed and how investment decisions are made. Private credit is also playing an increasingly important role in underpinning deal activity, reshaping financing structures, and influencing how transactions are executed.

Together, these dynamics are setting the tone for private equity and principal investor M&A activity as 2026 unfolds.

AI comes to the fore as both a strategic priority and execution tool for private equity and principal investors

Large-scale partnerships to fund AI data centres, the supporting computing capacity, and energy infrastructure continue to expand, reflecting both the scale of investment required and the huge need for future power availability. For private equity and principal investors, these investments represent more than infrastructure exposure; they are increasingly about securing long-term participation in the AI value chain through consortiums that combine financial, technology, energy, and sovereign capital.

The scale of this opportunity is substantial. External estimates suggest that $5tn to $8tn in capital expenditures will be required by 2030 to fund AI technologies and the enabling infrastructure, including data centres, chips, networks and new energy capacity. A recent example illustrating the growing role of long-term institutional capital is the AI Infrastructure Partnership, an investor group backed by some of the largest private equity, private credit, sovereign wealth, technology providers and energy companies. In October 2025, the group announced its first major investment with the $40bn acquisition of one of the world’s biggest data centre operators. In addition, other sovereign funds have teamed up with private equity firms to invest in a range of AI-related infrastructure assets or have made other direct investments of their own. 

Beyond infrastructure, AI is reshaping how private capital firms evaluate investment opportunities and position portfolio companies for long-term growth. Both generative AI (powered by large language models) and agentic AI (multiple AI agents embedded into specific workflows) are becoming integral to how private equity firms assess targets and plan value creation. Some large sponsors estimate that 30–40% of investment committee discussions now focus on whether portfolio companies can deploy AI to enhance productivity and growth or whether their business models could be disrupted by more technologically advanced competitors. Some private equity firms have launched virtual investment committee agents to review deal materials, surface sector-specific risks and opportunities, and feed recommendations into the investment decision-making process.

Fewer but larger M&A transactions define the next phase of private equity dealmaking

Globally, M&A activity over the past two years has been characterised by a decline in transaction volumes alongside a rise in aggregate deal values, a pattern that is also evident in private equity. As sponsors deploy capital more selectively, activity has skewed toward larger, higher-conviction transactions, often involving consortium arrangements, complex capital structures, and a growing share of take-private deals.  

In 2025, global private equity transaction value reached almost $2tn, up from roughly $1.6tn in 2024, even as the number of deals slipped to approximately 34,300 from about 36,500 year over year. A relatively small number of megadeals accounted for a disproportionate share of deal value.

Take-private transactions have been a defining feature of this trend, as sponsors seek greater control over strategy, capital allocation, and transformation initiatives away from the scrutiny of public markets. Recent examples include the $55bn agreed acquisition of videogame developer Electronic Arts by a sovereign wealth and private equity-backed consortium—the largest leveraged buyout on record, Sycamore Partners’s $23.7bn take-private of Walgreens Boots Alliance, and Blackstone and TPG’s agreed acquisition of women’s health, medical device, and diagnostic company Hologic, valued at up to $18.3bn.  

Geography continues to shape deal outcomes

While global deal volumes remain subdued, some markets have seen a resurgence in private equity activity. Japan has emerged as a standout, with sponsor-backed deal values rising sharply since 2024, supported by corporate governance reforms, pressure to improve capital efficiency and a weaker yen attracting international buyers. Global and domestic sponsors have been active in take-privates and corporate carveouts, as illustrated by EQT’s planned $2.7bn privatisation of Fujitec.

India has also continued to attract increasing private equity attention. Global sponsors are raising and deploying new Asia-focused funds. Based on PwC estimates, more than one-third of capital from newly raised Asian private equity funds is now being directed towards India, reflecting confidence in that market’s long-term growth prospects.

Secondary markets are easing exit pressure—but not eliminating it

The backlog of private equity portfolio companies continues to weigh on exit activity. By the end of 2025, the global inventory of private equity-backed companies rose to around 32,500, up from 29,400 a year ago, with a growing share held beyond targeted holding periods as IPO markets remained uneven and buyer appetites remained selective.

In this environment, secondary transactions have become an increasingly important relief valve. Sponsor-to-sponsor deals, GP-led continuation vehicles and other secondary structures are providing liquidity where traditional exit routes remain constrained, allowing managers to extend ownership of select assets while returning capital to limited partners (LPs). These structures are increasingly being used not only to manage timing risk but also to support longer value creation horizons for assets requiring sustained investment or operational transformation.

IPOs are an option again—just not for everyone

Public markets are showing early signs of reopening, with the $7.2bn IPO of Medline—the largest listing of 2025—providing a positive signal that issuance is beginning to pick up. However, IPOs continue to account for only a small share of private equity exits. As a result, secondary transactions, including sponsor-to-sponsor deals and continuation vehicles, are expected to remain the dominant exit route for private equity firms in 2026. That said, there may also be selective opportunities for sales to strategic buyers, following transactions such as GTCR’s sale of Worldpay to Global Payments and the proposed sale of Calpine to Constellation Energy by Energy Capital Partners and others.

Ultimately, the ability to generate exits through secondaries or other routes remains critical to returning capital to LPs and, in turn, supporting managers’ ability to raise new funds. The biggest GPs are continuing to raise large flagship funds, but the long tail of managers is struggling to follow suit. Some are facing capital constraints as exits have slowed and LPs demand returns.

In fundraising, size matters

Amid lacklustre distributions, global private equity fundraising remains under pressure, leading institutional investors to rein in commitments with a drop of 3.8% from $724bn in 2024 to just under $700bn in 2025—the lowest level in more than five years. However, fundraising activity among the top private equity funds has increased; last year the top ten took their largest share of US fundraising in more than a decade, because investors looking to increase their allocation of assets to private markets are backing the larger fund managers. The growth of megafunds reflects both investor demand for scale and the evolution of private markets themselves. Going forward, the largest private equity and principal investor platforms will play a central role in financing growth, managing risk, and driving consolidation across industries—making them a core part of the broader financial ecosystem.  

Private credit has become a central feature of private equity dealmaking, particularly in buyout financing. Global private credit assets under management reached approximately $2.4tn by the end of 2025 and are expected to continue growing through the remainder of the decade. In leveraged buyouts, private credit has largely displaced traditional bank lending, funding around 80% of global leveraged buyout financing in 2024 and 2025. As private credit has grown in scale and prominence, it has also attracted heightened scrutiny and debate. Below, we examine some of the most common misconceptions—or myths—surrounding the asset class and how they compare with the realities shaping private equity dealmaking today.

Myth 1: Private credit is a niche financing tool

Reality: Private credit is now mainstream

What began as an alternative to syndicated bank loans has expanded into infrastructure, asset-backed lending, and specialty finance. For private equity sponsors, private credit offers advantages such as speed, greater certainty of execution, and flexibility on structure. These advantages have become more valuable amid market volatility and tighter bank balance sheets.

Myth 2: Private credit is driving distress

Reality: The picture is more nuanced

Recent high-profile restructurings and bankruptcies reported in late 2025 have raised questions about underwriting standards. However, in several widely reported cases, private credit represented only a limited portion of the overall capital structure, with the majority of debt originated, underwritten, or syndicated by traditional banks. While losses are an inevitable feature of any credit cycle, private credit continues to account for a relatively small share of total corporate debt markets, suggesting that distress cannot be attributed to any single source of financing.

Myth 3: Private credit may cause the next systemic crisis

Reality: While the asset class has grown quickly, risks are likely overstated

The rapid growth of private credit and its relative lack of transparency have led to comparisons with pre-financial-crisis mortgage-backed securities and other complex instruments. These comparisons are likely to overstate the risks. Private credit lending is typically bilateral, more tightly documented, and subject to closer lender oversight than the highly leveraged, widely distributed structures that fuelled the global financial crisis. That said, the asset class has grown quickly, and it is now large enough that, in a severe downturn, it could amplify stress in parts of the financial system, particularly given the involvement of insurers and other long-term investors. While private credit exposures are generally not underwritten or backstopped by taxpayers, concerns around transparency and interconnectedness have prompted greater regulatory scrutiny.

Myth 4: Private credit operates outside regulatory oversight

Reality: Private credit is subject to increasing regulatory attention

Authorities are focusing on transparency, valuation practices, and investor suitability, particularly as retail participation grows. The IMF has called for more proactive supervision of private capital, while regulators such as the SEC are seeking improved reporting standards. In the UK, the Bank of England has launched a system-wide exploratory exercise to assess risks in private markets, involving many of the sector’s leading banks and private credit managers.

Myth 5: Banks will be unable to compete with private credit

Reality: Banks are competing—and adapting

While banks tend to face tighter capital and regulatory requirements than private credit managers, they continue to play a central role in corporate lending and dealmaking. Banks retain deep client relationships, balance-sheet capacity, and distribution capabilities that cannot be replicated quickly, if at all.

Even as they feel the competition for some of their lending, many banks are adapting by partnering with private credit funds to combine origination, structuring expertise, and capital. For example, in June 2025 Citigroup and Carlyle Group announced an agreement to exchange market intelligence and explore co-investment and financing opportunities. 

At the same time, banks are also reclaiming share in parts of the corporate lending market, supported by cheaper funding, a renewed risk appetite, and easing regulatory constraints, allowing them to offer more competitive pricing and structures that are beginning to pressure private credit margins and push some lenders out of larger transactions.