Private equity is back—at least on the surface.

After three sluggish years, global buyout deal value and exits surged in 2025 to their second-highest levels on record, signaling what could be the start of a sustained rebound. But beneath the headline recovery, the math of private equity has changed dramatically.

That’s the central takeaway from the 17th annual Global Private Equity Report by Bain & Company. The firm’s message is cautiously optimistic: momentum is returning, but the industry has hit a structural inflection point. Growth is harder, liquidity is constrained, and investor scrutiny is sharper than ever.

Or as Bain puts it: “12 is the new 5.”

A Record Rebound—With an Asterisk

Global buyout deal value jumped 44% year over year in 2025 to $904 billion (excluding add-ons). Exit value climbed 47% to $717 billion. Both figures rank as the second-highest ever, trailing only private equity’s 2021 peak.

The year was punctuated by headline-grabbing megadeals. A $56.6 billion public-to-private acquisition of Electronic Arts set a new buyout record. Macquarie’s $40 billion sale of Aligned Data Centers to BlackRock and tech consortium partners underscored investor appetite for AI infrastructure assets. Other standout deals included Air Lease ($27.5 billion) and Walgreens Boots Alliance ($23.7 billion).

But here’s the catch: the recovery was narrow.

Just 13 megadeals worth more than $10 billion accounted for $274 billion—roughly 30% of global deal value. Eleven of those took place in the US. Deal count actually fell 6% year over year to 3,018 transactions, even as average disclosed deal size hit a record $1.2 billion.

In other words, 2025 was a year of giants.

Liquidity Logjam Still Haunts the Industry

For all the celebration around deal value, cash returns to investors remain stubbornly weak.

Distributions to limited partners (LPs) as a percentage of net asset value have now stayed below 15% for four consecutive years—a record low stretch for the industry. In 2025, the figure hovered around 14%, a level not seen since the 2008–09 financial crisis.

Meanwhile, the industry is sitting on roughly 32,000 unsold portfolio companies worth an estimated $3.8 trillion. Average holding periods have stretched to around seven years, up from five to six years during the 2010–2021 window.

That backlog is more than an accounting issue. It directly affects fundraising.

With less cash flowing back from older funds, LPs face allocation constraints. Buyout fundraising fell 16% in 2025 to $395 billion, and the number of funds closed dropped 23%, marking a fourth straight year of decline. Investors are becoming choosier, concentrating commitments among large, established managers with consistent top-quartile performance.

The golden decade is clearly over.

The New Math: “12 Is the New 5”

During the 2010s, private equity benefited from a rare alignment of tailwinds: near-zero interest rates, expanding valuation multiples, abundant leverage, and eager investors. In that environment, a typical deal needed just 5% annual EBITDA growth to deliver a 2.5x multiple on invested capital over five years—translating into roughly a 20% internal rate of return.

Today, that math doesn’t work.

Borrowing costs sit in the 8% to 9% range. Leverage ratios are lower, typically 30% to 40%. Purchase multiples remain high, but the era of automatic multiple expansion is largely gone.

To achieve the same 2.5x return benchmark, Bain calculates that deals now require 10% to 12% annual EBITDA growth over five years. Hence the shorthand: “12 is the new 5.”

This shift fundamentally changes the skill set required to win in private equity. Financial engineering alone won’t cut it. Operational improvement, revenue acceleration, technology enablement, and disciplined execution become central—not optional.

Rebecca Burack, Bain’s global head of private equity, puts it plainly: attractive returns now demand sustained double-digit growth. Firms that treat alpha generation as a system, not a slogan, will separate themselves.

Megadeals Mask Structural Pressures

The rebound in 2025 was driven by pent-up deal appetite and $1.3 trillion in global buyout dry powder, much of it aging. Falling interest rates and revived credit markets provided the spark.

Yet much of the equity in megadeals came from outside traditional PE funds—sovereign wealth funds and corporate buyers eager to deploy capital, particularly in AI-linked sectors. That influx of non-buyout capital intensifies competition and dilutes private equity’s share of transactions.

Below the $10 billion threshold, growth was more modest. Deal value excluding megadeals rose 16%. The $1 billion to $5 billion segment grew 29%, while the $5 billion to $10 billion range increased just 6%.

North America drove roughly 80% of overall deal value growth. Europe’s contribution looked comparable only after removing megadeals from the equation.

In short, scale players thrived. The rest of the market remains uneven.

Exits Improve—But Not Enough

Exit value rebounded sharply in 2025, helped by improved macro conditions and strategic demand fueled partly by AI-driven infrastructure needs.

Sponsor-to-strategic exits (sales to corporate buyers) rose 66% globally, with especially strong growth in North America and Europe. Sponsor-to-sponsor deals grew 21% worldwide, though heavily influenced by a few outsized transactions.

IPOs rose 36% from a very low base but remain a minor exit channel due to market volatility and execution risk.

Secondaries and continuation vehicles (CVs) continued expanding as alternative liquidity mechanisms. GP-led continuation vehicles grew 62% year over year and have expanded at a 37% annual rate since 2022. While still under 10% of total exit value, CVs are increasingly used to generate partial liquidity without fully exiting assets.

Despite these improvements, overall net cash flow for private equity only modestly exceeded breakeven in 2025. The liquidity challenge is easing—but far from solved.

Fundraising: Survival of the Fittest

Even as total private capital fundraising reached $1.3 trillion in 2025—boosted by infrastructure funds—buyout fundraising weakened.

LPs still value private equity’s diversification benefits and long-term outperformance versus public markets. But they’re demanding clearer strategies, consistent distributions, and demonstrable alpha.

Competition for capital is intensifying as costs rise. Leading firms are investing heavily in sector expertise, AI capabilities, professionalized investor relations, and technology platforms. At the same time, management fees are under pressure and LPs are pushing for more co-investment opportunities.

The bar is rising on both performance and communication.

2026: Cautious Optimism

Bain sees 2026 shaping up positively. Interest rates are trending downward, pipelines are stocked, stock markets remain elevated, and credit markets have stabilized—assuming no unexpected macro shock.

But this is not a simple cyclical rebound. It’s a structural reset.

The private equity model that thrived in the 2010s—leveraged, multiple-expansion-driven, and capital-rich—has given way to a more competitive, operationally intensive era.

Firms that can identify targets years in advance, conduct “full potential due diligence,” and systematically unlock revenue and operational improvements will likely outperform.

The rest may find that second-highest-on-record deal values don’t guarantee first-rate returns.

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