Mid-year indicators underscore the ongoing impact of economic volatility, persistent high interest rates, and a cautious investment climate. Despite a modest uptick in capital deployment, deal flow and exit activity remain subdued. For private equity professionals, these dynamics highlight the importance of maintaining strategic discipline and readiness as the investment environment continues to evolve.

Decreased activity: By the numbers 

PitchBook data for the first half of 2025 shows a continued slowdown in U.S. private equity deal activity, despite modest growth in capital invested. Here's how the numbers compare to 1H 2024.

Exit activity: Pressures and pause buttons 

The exit market remained subdued, reinforcing a cautious approach by sponsors. Fewer deals closed, and total exit capital declined.

Sponsors are holding onto assets longer in hopes of better valuation clarity or improved market conditions. Strategic acquirers remain selective, and IPO activity remains minimal.

Emerging mid-year trends

Several industry-wide trends emerge from the mid-year data:

1. Fundraising slowdown.  According to Preqin, 115 private equity funds launched globally between January 1 and June 30, 2024, compared to just 41 through June 23 in 2025. This contraction reflects investor caution and longer timelines for capital commitments.
2. Fewer, pricier deals. While the deal count is down, higher EV/EBITDA multiples suggest that firms are doubling down on high-performing assets with resilient models, even if earnings are compressed.

More equity, less debt. With the cost of borrowing still high, private equity firms are adjusting their capital structures to include more equity and trading leverage for greater stability.

Longer hold periods. Exit delays are reducing capital returns to LPs and elongating the investment cycle.

Impacts across the investment lifecycle

1. Investment:

• Valuation gaps and tighter financing constrain deal flow.
• Many buyers and sellers are struggling to find common ground on pricing.

2. Exit:

• Fewer exits mean slower capital recycling.
• Alternative strategies, such as continuation of funds and structured secondaries, are being explored.

3. Value Creation:

• Investors are reevaluating growth plans for current portfolio companies and future targets.
• Valuations are increasingly dependent on durable margins and visible growth.

Strategies for success in a competitive market

In this slower but competitive market, firms can recalibrate by:

• Doubling down on diligence. Proactive risk assessment and scenario modeling will better inform bids and mitigate downside risks.
• Emphasizing operational value creation. Portfolio companies that can generate margin improvement will be best positioned for exit.
• Staying exit ready. When the rate environment and comparables improve, having clean books and scalable operations will accelerate go-to-market strategies.
• Communicating clearly with LPs. Transparency around hold periods, exit plans, and valuation outlooks builds trust.

What’s next

Private equity professionals must strike a balance between patience and preparation. With market recalibration still underway, the second half of 2025 will reward those who invest in operational readiness, pricing discipline, and longer-term value-creation strategies. Dealmakers who remain agile and focused on fundamentals will emerge stronger when confidence and clarity return to the market.