2025 Highlights and 2026 Outlook—A Year of Volatility and Market Momentum

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2025 marked a volatile year for global dealmaking, driven by tariff announcements, elections, geopolitical tensions, and policy uncertainties. Nonetheless, the transactional markets are poised for a new phase, one defined by disciplined underwriting, innovative deal structures, and renewed momentum. There is growing consensus across dealmakers, investors, and corporates that the long-awaited dealmaking revival is right around the corner.

To help you assess the year’s themes and plan for what’s ahead, we are pleased to share our annual report. This includes a recap of 2025, as well as considerations for 2026. Several trends stood out.

• Deal activity was uneven, but values proved resilient. After an encouraging start in the first quarter, bouts of volatility slowed processes, but the back half of the year saw reemergence and a notable return of larger, strategic transactions. The market is beginning to shift from “waiting on the sidelines” to selective but meaningful re-engagement.
• Liquidity and exit pressure shaped private equity behavior. Sponsors remained focused on realizations and portfolio optimization, driving continued use of continuation vehicles, structured minority investments, and GP‑led solutions where a satisfactory traditional sale or IPO was not yet available.
• Financing became more diverse and sponsor‑friendly in structure. Private credit remained central to acquisition and refinancing activity, increasingly paired with bank, mezzanine, and other bespoke capital solutions to balance speed, certainty, and pricing.
• Capital markets thawed. The IPO market reopened intermittently for high‑quality issuers and sponsor exits, while follow‑ons and convertible issuances provided practical alternatives for growth capital, de‑leveraging, and balance‑sheet management. Total IPO proceeds rose over 30% year-over-year although IPO volume remained low relative to pre-Covid levels.
• Regulatory approval became crucial as deals became more complex. In the face of rising geopolitical tensions, parties placed greater emphasis on regulatory and national security clearances.We also saw careful diligence and risk allocation around AI/data, cyber, and supply chains, and tighter alignment on interim operating covenants, earn‑outs, and other valuation‑bridging tools.
• AI is reshaping deal strategy and diligence. Sponsors are increasingly evaluating AI capabilities as a core value driver, both as a growth lever and a risk area. Deal sourcing, diligence, and post-close value creation have potentially been accelerated through AI-enabled analytics and automation. There is increasing focus not on the idea of AI, but the practical application and impacts on business.

Looking to 2026, we see reasons for optimism. If interest rate and inflation dynamics remain positive, we expect increased sponsor exit activity, more strategic combinations and carve‑outs, and continued demand for private capital to finance growth and transformation. At the same time, we anticipate sustained scrutiny from competition and foreign investment regulators, ongoing activism and governance pressure, and areas of volatility tied to geopolitical and trade developments. The best‑positioned deal teams will be those who move with agility, build flexibility into timetables, develop a proactive regulatory strategy early, and thoughtfully engage with and allocate emerging operational risks.

View the full report here.