European Private Equity Posts a Record Year as Capital Concentrates at the Top – 0100 Weekly Brief
Hello there!
With 2025 complete and new investment cycles underway, this is a good time to review how private equity performed over the past year. Looking at full-year data provides a clearer view of capital flows, deal activity, and investor behavior beyond individual transactions.
In Europe, private equity recorded its strongest year on record, with higher deal values, more transactions, and an increase in large buyouts supported by lower borrowing costs. At the same time, fundraising became more concentrated, mirroring trends seen in venture capital. A smaller group of large, established private equity firms captured their biggest share of capital in more than a decade, as investors prioritized scale and proven track records.
European Private Equity Has a Record Year
European private equity had a strong year in 2025, with deal activity reaching record levels. Both the total deal value and the number of deals rose sharply from the year before. Lower interest rates across Europe made borrowing cheaper, which helped support larger transactions. While trade tensions caused some early hesitation, confidence improved as the year went on.
Deals also became larger, showing that investors were more willing to take risk. Very large deals worth more than €1 billion made up a much bigger share of total activity. Both average and typical deal sizes increased, reflecting better financing conditions and stronger support from lenders and sponsors.
US investors played an important role in Europe’s recovery. A growing share of European deals involved US firms, especially the biggest transactions. US investors brought deep pools of capital and focused on Europe for diversification and better value compared with their home market.
Big Funds Win as They Capture Record Share of Capital
Additionally, fundraising became more concentrated in 2025, as investors allocated more of their money to the largest and most established firms. The top 10 private equity funds raised nearly half of all US capital, the biggest share in more than ten years. While these large firms continued to grow, smaller managers struggled to raise money. Investors, especially pension funds, are becoming more cautious as private equity has slowed and cash returns have become harder to find.
This shift shows how investor priorities have changed. With deals and exits taking longer, many investors are cutting back on smaller or weaker managers and sticking with firms they trust to handle big investments.
Our IPO Exit Model Is Losing Its Shine
European private equity is quietly moving on from IPOs as the default exit, and the numbers make it hard to argue otherwise. Even after hopes of a rebound, PE-backed IPO exit value in Europe fell sharply in 2025, with fewer deals and smaller outcomes underscoring how fragile public markets remain. While a handful of large listings late in the year offered some optimism, they weren’t enough to change the bigger picture: IPO activity now looks structurally weaker than in past cycles, not just temporarily slow.
Faced with volatile markets, valuation gaps, and long execution timelines, sponsors are increasingly choosing sponsor-to-sponsor deals and secondary exits that offer speed, certainty, and control. For European PE managers under pressure to return capital, the public markets are no longer the obvious finish line; they’re just one option among many, and often not the most attractive one.
A Comeback Year for Hedge Funds
As investors became more selective, the shift went beyond which private equity firms they supported. It also changed where money flowed across markets. Liquidity and flexibility became more important, especially as public markets looked expensive and private equity returns slowed.
That opened the door for hedge funds. With the ability to move faster and manage risk more actively, hedge funds took a leadership role in 2025 and took on a larger role in investor portfolios. The industry had its strongest year ever, adding about $628 billion in assets and growing past $5 trillion in total. Solid returns, close to 13 percent on average, helped rebuild confidence. As worries about an overheated stock market grew, investors turned to hedge funds for better risk control and greater flexibility.
Private equity struggled as deals slowed and cash returns became harder to deliver. Hedge funds filled that gap by offering liquidity, faster decision-making, and more reliable performance. Large multi-strategy firms led the way, showing they could handle changing markets with discipline. After a tough period in 2022, hedge funds proved their value again and emerged as a trusted, steady choice for investors focused on stability and long-term results.
Private Equity Has Momentum on Both Sides of the Atlantic
Europe wasn’t the only market with strong activity in private equity; the US is following closely, even if the recovery looked different on each side of the Atlantic.
In Europe, deal activity reached record levels as lower interest rates made financing easier and brought confidence back. In the US, dealmaking also improved, but it was concentrated in specific sectors rather than spread evenly across the economy. Construction stood out as the biggest winner, with deal value rising to about $31 billion, well above recent averages. Engineering and healthcare IT also gained momentum, showing where investors were most confident in deploying capital.
That selectivity showed up clearly in exits and fundraising. In the US, exits remained slow overall, with only a handful of sectors delivering strong results. This made investors more cautious and pushed them toward larger, more established firms that could manage longer holding periods and tougher exit conditions.
Europe, by contrast, benefited from improving conditions and growing interest from US investors, especially in larger deals where scale and certainty mattered most.
🗓️ 0100 DACH Panel Spotlight: Middle Market Private Equity Buyout Trends
0100 DACH 2026 opens the year with a confident, clear-eyed conversation about the state of middle-market private equity in the region.
Bringing together Andreas Klab (Rivean Capital), François Candelon (Seven2), Jasprit Chana (Long Arc Capital), Christoph Rinnert (Tikehau Capital), and Philipp Berghofer (Mutares), the panel cut through the noise around macro uncertainty to focus on what really matters: fundamentals, execution, and patience. With ample dry powder still on the sidelines, investors agreed that selectivity, not speed, is shaping today’s deal activity.
🌍 Across the Ecosystem | News & Useful Resources for You
Everyone in private equity is talking about liquidity and exits right now — and for good reason. After years of heavy dealmaking and higher valuations, firms are now working through a large backlog of assets bought during the boom. While deal activity improved in 2025, exits have not kept pace, leaving investors more focused on how and when capital can be returned rather than on new growth alone.
That pressure is showing up across the industry. Here’s a look at what’s happening across the industry:
🗞️ News | Private Equity Has More Housecleaning to Do in 2026
Private equity firms made some progress in 2025 selling older portfolio companies, but the industry is still carrying a large backlog into 2026. Despite an improvement in overall deal activity, the number of U.S. companies held by private equity continued to rise, reaching about 12,900 by the end of September, according to PitchBook.
Average holding periods have come down from their 2023 peak but remain high at nearly seven years, well above pre-pandemic levels. The slow pace of exits has frustrated investors and made fundraising more difficult.
The buildup traces back to the buying boom before 2022, when firms paid high prices using cheap debt. Rising interest rates then pushed up financing costs and sharply reduced dealmaking, leaving firms holding assets bought at peak valuations. Many managers are now reluctant to sell at lower returns, since doing so would hurt performance metrics and compensation.
🗞️ News | Private equity backers offload record amount of old fund stakes
The rush into private equity secondaries turned into one of the clearest signals of stress in the buyout market in 2025. With exits hard to come by, investors sold a record amount of stakes in older funds, pushing global secondary transactions past $110 billion for the year, according to Financial Times.
What was once a niche corner of private markets has become a main release valve, allowing investors to raise cash without waiting for fund managers to sell underlying companies.