All Access

M&A Deals

M&A Deals Alerts

Alert

Private equity firms are dreaming of a busy 2026, after tariffs and a government shutdown dashed hopes for a banner 2025.

The big picture: Private equity needs "to play catch-up" to offload assets and spend its dry powder, Clifford Chance M&A lawyer Neil Barlow tells Axios Pro.

With a rosier exit market, a backlog of dry powder, and aging portfolio companies, firms have their work cut out for them.

Flashback: 2025 was supposed to be a vibrant year. Then Liberation Day happened.

"The whole market backed up for two or three months," Brian Bernasek, a managing director at the Carlyle Group, tells Axios Pro.

The backup spurred a secondaries boom as LPs sought liquidity.

Then came the government shutdown, cramping the IPO market.

By the numbers: Deal count for U.S. private equity firms is down over 15%, according to data from PitchBook.

And firms are sitting on some 31,000 unsold portfolio companies, Hugh MacArthur, chairman of Bain & Co.'s private equity practice, tells Axios.

Yes, but: In terms of deal value, it was PE's best year since 2021, with activity marking a 13% jump over last year to surpass $1 trillion.

That's largely thanks to a few megadeals like the record $55 billion take-private of video game maker Electronic Arts.

What they're saying: "They're not going to sell all these companies in 2026 because the problem is just too big," MacArthur says.

"Half of those companies have been held for about five years or even longer."

"You have a backdrop where the equity markets are good, the credit markets are good and strong. You have private credit as well as the syndicated loan market working very well," Carlyle's Bernasek says.

"That macro backdrop ... gives us optimism that [the industry] will be expanding as we head into '26."

In every interview, dealmakers were optimistic that the same conditions that primed the pump for '25 should hold for '26, assuming there isn't an asteroid heading for Wall Street.

State of play: Executives from both KKR and Apollo in September said they see consolidation among private equity firms in the years to come.

"You're going to see a number of GPs that are going to shrink in size, and some materially so," KKR CFO Robert Lewin argued at the Barclays Global Financial Services Conference.

"I think there's many, many PE funds that are out there that have raised their most recent fund and don't realize it's their last fund," Apollo president Jim Zelter said at the same conference.

Zoom in: If the exit market doesn't pick up enough to make up for lost time, and firms can't shed their aging portfolio companies, then fundraising will only get harder.

And the biggest firms — now engaged in everything from private credit to insurance to infrastructure — will only get bigger.

What they're saying: "Some fundraising timelines have been extended, but we're seeing particularly the stronger performing funds able to raise capital effectively," Michael Lee, a partner at Ropes & Gray, tells Axios.

"I think we will continue to see some level of consolidation," he says.

The bottom line: Hope really is a matter of perspective.

PE is ready for dealmaking, if 2026 cooperates

The industry is hopeful that things are looking up, for real this time.

a collage of money, arrows, time sheets and checks

Private equity firms are dreaming of a busy 2026, after tariffs and a government shutdown dashed hopes for a banner 2025.The big picture: Private equity needs &quot;to play catch-up&quot; to offload assets and spend its dry powder, Clifford Chance M&amp;A lawyer Neil Barlow tells Axios Pro.

topics

politics-policy

epstein-files

donald-trump

2026-midterm-elections

immigration

behind-the-curtain

race-and-equity

technology

privacy-tech-regulation

automation-and-ai

tiktok-news

big-tech

social-media

cybersecurity

economy

social-security

inflation

tariffs

federal-reserve

jobs

transportation

business

stock-market-news

retail-news

crypto

media

elon-musk

dealmaking

PE is ready for dealmaking, if 2026 cooperates

What to read next