distributions by managers relative to each dollar invested by LPs, has become a key factor for LPs when deciding whether to reinvest in a manager. Actual cash distributions have become more important than paper returns. The increase in exit and buyout deal value so far in 2025 is a positive sign that the industry may be turning a corner and moving into a position to speed up the realization of liquidity. The use of continuation funds has also helped to drive stronger DPI (see Alternative liquidity solutions, page 32). However, macroeconomic complexity indicates that this will be a gradual unwinding, with deal activity recovering incrementally, as opposed to the deal deluge that stakeholders had been hoping for at the start of 2025. “Looking forward, I expect that deal activity will continue to increase, but it will be a gentle thaw rather than everyone jumping in at the same time,” says Markus Bolsinger, co-head of Dechert’s PE practice. PE sponsors will also continue to orchestrate liquidity events using alternatives to traditional exit pathways. “Even though there is still lingering market uncertainty, the PE market will be active, with GP-led deals, secondaries transactions and continuation fund vehicles complementing M&A and IPOs,” says Comis. There is still a great deal of work to be done, but with a bigger transactional toolbox at its disposal, and a mainstream M&A market that is defrosting, the industry is moving back in the right direction.
“It does feel like the deal markets across key jurisdictions are getting back on track,” says London-based Dechert partner Nick Tomlinson. “After a strong start to 2025, buyouts did take pause to digest U.S. tariff announcements, but deal processes are back underway, and I would expect to see deal announcements rise through the rest of 2025 and into 2026.” Work to be done Increases in buyout and exit value in the context of an unpredictable global economy are a testament to PE’s resilience and ingenuity, but dealmakers will not be complacent about the volume of work still required to bring the industry back into balance. Rising interest rates and market dislocation have made it difficult to exit companies and have also slowed deployment. GPs still have to offload 29,000 unsold portfolio companies worth an estimated US$3.6 trillion, according to Bain & Company figures. On the deployment side, the clock is ticking for managers to put US$1.2 trillion of dry powder to work, especially given that close to a quarter of this capital is aging and has been available for investment for more than four years. “The single biggest issue facing PE funds is liquidity,” says Sabina Comis, global co-managing partner of Dechert. “If funds don’t manage to exit deals, they don’t give money back to their investors, and those investors don’t reinvest in successor funds. The liquidity cycle is stalling.” Indeed, LPs are so focused on liquidity that the Distributed to Paid-In Capital (DPI) metric, which tracks the actual
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