Private equity in 2025 to depend on macroeconomic stability, interest rates and tariffs: Bain & Company

New Delhi [India], March 9 (ANI): The outlook for private equity in 2025 will depend on the macroeconomic stability, as global mergers and acquisitions (M&A) activity showed signs of slowing early in the year, and uncertainty around inflation, interest rates, and tariffs persists, according to a report by Bain & Company.

“Whether the momentum can build in 2025 will largely depend on macro conditions and policy. The

industry is certainly anxious to make deals,” the report said, adding that year’s early slowdown in M&A activity globally suggests that the dreaded U word (uncertainty) continues to keep markets on edge.

The Global Private Equity Report 2025 added that present slowdown in fundraising is linked to previous years’ capital drawdowns and low exit activity, which have led to reduced distributions and lower new allocations from LPs.

This mirrors patterns seen after the global financial crisis. Despite the slowdown, private equity firms have become creative in generating liquidity, utilising strategies like minority interests, dividend recapitalisations, secondaries, and NAV loans.

Currently, 30 per cent of buyout portfolio companies have undergone some form of liquidity event, raising USD 360 billion.

Private equity saw a rebound in 2024, with investments and exits reversing a two-year decline, as deal-making picked up due to improved macroeconomic conditions and lower central bank rates.

However, fundraising remained sluggish, as limited partners were cautious about allocating capital amid prolonged asset holding periods. Despite a challenging period since the global financial crisis, deal value increased, but the number of deals remained lower.

The report addded that the slowdown isn’t surprising. Fund-raising is a lagging indicator that responds to industry cash flows, it stated.

While buyout funds raised 23 per cent less capital globally in 2024 than the previous year, larger, experienced funds with strong track records continued to attract most capital, said the report.

The report further added,”Persistent sluggishness in exit volume will continue to pressure the industry to generate liquidity creatively.”