Private equity has promised a M&A boom, but the world is still waiting
market reel In early March, President Donald Trump launched a tariff barrage by targeting Canada and Mexico. However, several private equity executives were held at a meeting hosted by Bloomberg in downtown Manhattan. I’m calmed downensuring the overall economic and regulatory outlook for the audience remained sunny.
After a few years of slowing down for a deal, Wall Street had I was waiting enthusiastically Deregulation and low taxes in the Trump 2.0 era to unleash M&A banner year in 2025.
“I might not feel that good this week,” said Jonathan Grey, president and COO of Private Equity Behemoth. Black Stonesaid this on stage in March. “But when we finish the year, I think it will be a better year in terms of activity.”
His predictions may still come true. But so far, Tariff uncertainty We have suppressed a dramatic surge in activity.
Recently, in line with last year’s trends, approximately $570 billion worth of US transactions were announced by May. Report From PWC. And while the M&A market shows signs of life as it returns to pre-pandemic norms, this situation appears to be far from 2021, when American companies were already taking part in 5,800 transactions for nearly $1 trillion in the first five months of the year.
Meanwhile, PE companies find it more difficult to raise new funds as it takes time to return capital to existing investors. At the end of the first quarter, funding fell 30% year-on-year to $462 billion. According to In the pitch book.
Hilary Wiek, senior strategist at Pitchbook, has condemned weak trading activity and the distribution of “anemia” to so-called limited partners, or PE investors commonly referred to as “LPS.” (But Grey’s Blackstone was able to lead the industry in the first quarter by raising $21 billion for its ninth flagship fund, a slight decline from the $26 billion promised to its fund’s predecessor.)
That doesn’t mean that the long-awaited M&A boom won’t come. May of PWC investigation Of the roughly 700 CFOs and other executives, about half said they were in the early stages of trading, said Kevin Desai, the company’s US trading platform leader. Thirty percent of respondents said they were forced to suspend or revisit the transaction due to tariff issues, he added.
“There’s still a very high level of indecision,” said Desai, who led the PWC PE consulting arm. luck. “But it’s not as if they haven’t seen the opportunity. It’s not as if they don’t need it. There are only things that get in the way.”
Almost 60% of the executives surveyed told the PWC they were missing out on opportunities because they couldn’t make decisions quickly enough, he told them.
“I think there will be a huge amount of pickup here as economic and trade policies become more focused,” Desai said.
There are signs of Optimism Regarding big money transactions. In May, US buyers announced Megadale more than $5 billion in May than any other month in the last three years, according to a PWC report. Blackstone is making the second largest of these acquisitions with plans to buy TXNM energy for $12 billion. Around S&P Global Market Intelligence. The company did not respond immediately luck’sRequest for comment.
“People who can withstand uncertainty are beginning to get busy,” Desai said.
Everyone else is waiting for the cloud of uncertainty to clear, he said.
Secondary sales could promote more PE exits
It doesn’t seem to happen soon enough for many of the private equity world. That’s what the fund manager is It will take time As a result, LPS has less money to throw in order to generate returns that will win the markets that investors paid.
The amount of time a PE company has held assets has steadily risen since 2018, before flipping it for profit. Over 30% of portfolio companies are currently held for more than five years, with the highest median holding period of 3.5 years in at least 10 years. Quote According to PWC.
Combined with higher interest rateDesai means that fund managers need to find higher revenue growth from portfolio companies in order to generate appropriate returns for investors.
On the other hand, when it comes to new investments, the tougher situation forces businesses to choose a spot. For example, if a large multinational company makes unrewarded strategic moves within two years, it will likely survive. But for fund managers, it quickly becomes difficult to make up for bad bets.
“I have to extend my hold period, meaning I have to create an unbalanced amount of growth,” Desai said.
One sign of this slowdown was a surge in so-called secondary transactions, often at discounts when LPS sold some of its private equity stakes. For the most notable institutional sellers: Harvard and Yale.
Desai believes the transaction is realistic about the returns investors can expect. He said fund managers may have the flexibility to move on from older portfolio companies.
“I think it actually unlocks some of the packed sales,” Desai said.
And perhaps a major flood of trade will finally arrive.