The industry overview
Private capital firms have experienced notable fluctuations in global deal volumes and values over the past several years. On average, deals in this space represented about 21 percent of all M&A deals over the past six years, peaking at 26 percent in 2021, spurred by postpandemic tailwinds and increased capital flows. Thereafter, however, deal count has decreased every year through 2024—dropping by 22 percent in 2022 and by another 25 percent in 2023. Private capital firms have also experienced an increase in buy-side activities, which reached (on average) 60 percent of total deal value between 2022 and 2024.
The recent decline in deal volume suggests that investors are proceeding with caution, waiting for greater clarity on how the market will evolve in the wake of the US election outcomes, changing geopolitical dynamics, surges in demand, a potential decrease in interest rates, the opening up of IPO markets, and a range of other external forces.
A key factor to consider, however, is the growing pressure from limited partners for disinvestments in older vintages. And given the availability of dry powder among private equity (PE) companies, there is also a push to see more new investments. In this context, the private capital market is poised for revitalization in the very near future.
Sector trends: TMT was most active
Private capital firms have been active in several industries over the past few years—but activity in the technology, media, and telecommunications (TMT) sector continues to lead the way in terms of deal value and volume. Between 2019 and 2024, for instance, TMT accounted for 25 to 30 percent of deals in private capital. Other relevant sectors are global energy and materials (GEM), which had 10 percent of total deal value in 2024 (in line with 2019); financial services and insurance, which had 10 percent of total deal value in 2024 (with an increase of about nine percentage points since 2019); and advanced industries, which had 6 percent of total deal value in 2024 (at about the same level as in 2019).
Recent trends, such as the acceleration of digital, data-driven, and technological innovation, and the global energy transition, seem to have influenced the concentration of investments in these sectors.
Regional trends: High activity in the Americas
A look back at regional trends reveals that total deal value in the Americas increased in 2024, compared with 2023. The first nine months, in fact, were close to prepandemic performance. The Americas now account for 49 percent of total deal value globally—with the value of transactions in the region increasing in the past year (in both absolute and relative terms) and the volume of transactions growing, specifically in buyout deals. Europe, the Middle East, and Africa (EMEA) still are reporting significant private capital activity and account for 33 percent of total deal value worldwide.
Opportunities for 2025—and beyond
Private capital firms, under increasing pressure from their investors to deploy their reserves of dry powder, could play an even more prominent role in the M&A landscape soon.
New investment opportunities are emerging in private credit, infrastructure investments, and secondaries. In a continuation of 2024 trends, the acceleration of take-private deals may remain an attractive opportunity for private capital firms to invest their growing reserves of unallocated capital. Also, the potential for lower valuations (for instance, in the United States, compared with Europe) may promote more cross-border M&A backed by financial sponsors.
As private capital firms face more pressure from limited partners (LPs) to divest higher-vintage capitals and distribute attractive yields, they will need to explore creative methods for exiting and reimbursement. Some factors may lead to a more benign exit market—for instance, a decrease in interest rates, successful anchor deals, or sustained strength of the equity market—thereby enabling funds to reimburse high-vintage capitals and achieve the returns demanded by LPs.
And finally, new geopolitical dynamics will prompt private capital firms to redefine their roles; the call for new investments in sectors associated with innovation and competitiveness is already intensifying on both sides of the Atlantic.
In Europe, Italian economist Mario Draghi’s European competitiveness report emphasizes the importance of boosting economic competitiveness through digital technology, energy transition, defense, and breakthrough innovation. Private capital can be mobilized to support investments in all those areas. In the United States, potential regulations aimed at accelerating innovation might further pave the way for new investment opportunities for private capital firms.
