Growth, Innovation and Resilience: What to Expect from Private Equity in Europe in 2026

• Our data shows that confidence is in abundance. More than half (52.1%) of private equity leaders are ‘very confident’ for the year ahead, citing strong fundamentals and outlook.
• As it emerges from a period of flux, the private equity industry is entering a phase of growth and innovation. Private equity leaders showed resilience through the economic uncertainty of the last few years. Now they're seeing stability return to the market and there’s renewed confidence in firms’ ability to do transformative deals. Almost all (94.0%) European private equity leaders expect transaction volumes to increase in the next twelve months.
• However, European firms also identify three key barriers to their expansion in 2026.
• The first is regulation in Europe and the UK, with the industry increasingly challenged by diverging regulatory frameworks on either side of the Atlantic.
• Second, the exit environment remains challenging, prompting firms to develop new strategies to return funds to investors.
• And third, there are signs that longer hold periods and concerns about transparency are creating tensions between LPs and GPs, putting productive relationships at risk.
• While these barriers may temper leaders’ outlook for growth, firms are adapting to evolution in the market as we enter a new era for private equity. Our data shows that one in five (19.2%) private equity leaders in Europe and the UK are repositioning in response to market shifts. Leaders are considering how to adjust their strategies and operations to drive growth in a shifting market. Our report indicates that this is ushering in a period of evolution, with increased consolidation and specialisation among firms, as they work to differentiate themselves in a crowded sector.
• And the opportunities are significant for firms able to put themselves in the best position to capitalise. The research shows that European private equity firms believe there is strong appetite for investment, particularly from the US, as Europe’s relative stability and attractive valuations drive investment.
• It has faced a demanding few years, but the private equity industry is showing it can adapt. As we enter 2026, the next 12 months will be crucial for the future of the industry.

Deal Activity & Market Confidence in 2026: Private equity leaders across Europe and the UK are highly confident about the market’s prospects in 2026, with over half describing themselves as “very confident” and nearly all expecting transaction volumes to rise significantly. Despite recent turbulence from geopolitical conflict and elevated interest rates, the sector is adapting, with firms restructuring strategies and building sector-specific expertise to capitalise on emerging opportunities.

US Investment Opportunities in Europe: European private equity markets are attracting increased attention from US investors, driven by relatively attractive valuations, perceived political and regulatory stability, and a large pool of US dry powder seeking deployment. While Europe is well positioned to benefit, there are signs of divergence between UK and continental European markets in terms of confidence and readiness to attract US capital.

Regulatory and Exit Challenges: Regulation remains a major constraint for private equity activity in Europe, with both LPs and GPs citing it as a top barrier alongside interest rates and competition for assets. Exiting investments is also challenging due to valuation mismatches, tight credit, and subdued IPO markets, leading firms to favour continuation vehicles, recapitalisations, and secondary buyouts as alternative liquidity routes.

LP-GP Dynamics and Repositioning: Tensions between LPs and GPs are rising, with LPs expressing greater caution and demanding more transparency and reporting, while GPs are focused on performance. In response to market challenges, a significant proportion of firms—especially larger ones—plan to reposition through consolidation, specialisation, and realignment, aiming to differentiate themselves and maximise opportunities in a competitive and evolving landscape.