This year has been a mixed bag for private equity exits.

As of mid-December, North American PE exit volume had climbed 52% year-on-year to USD 415bn, its highest level since the highs of 2021.

A slew of mega-deals drove activity, led by Energy Partners’ USD 26.6bn sale of Calpine to Constellation Energy in January and GTCR’s USD 17.6bn sale of a 55% stake in Worldpay to Global Payments in April led the way.

“It was a story of value over volume,” said John Maldonado, managing partner at Advent International. “The market is rewarding the exceptional. If you’re a high-quality asset with a clear growth story, buyers are willing to pay up. For anything else, the doors are a little sticky.”

The story was more nuanced in the middle market, however. While expectations were high at the start of the year, a combination of higher interest rates, valuation mismatches and, crucially, uncertainty around US trade tariffs led to lower deal flow than expected for much of the year.

Still, after a choppy start, deal activity increased in the second half of the year as markets began to stabilize, and uncertainty over the impact of the trade tariffs dissipated, said John Stewart, CEO of MiddleGround Capital.

That drove total deal count – often seen as a reasonable proxy for mid-market activity – to its highest tally since 2021, with 785 deals as of mid-December.

“There’s still a lot of pent-up demand in the lower middle market,” added Stewart. “We saw deals that were being released in November, and usually nothing gets released in November because everybody’s waiting for January. So, I think it’s going to be interesting to see what happens in January.”

Despite the overall increase in deal activity, volumes in the lower end of the middle market have not yet fully recovered from the market trough, according to C.J. Brucato, CEO of Abry Partners.

“It’s just not there yet, so it’s not easy,” said Brucato. “There has been just a lack of an abundance of high-quality deal flow.”

Meanwhile, many PE firms continue to hold onto an aging backlog of companies. Sash Rentala, head of financial sponsors at Solomon Partners, noted that US PE inventory has now climbed to around 13,000 companies, 67% of which have been held for four years or more.   The median hold for US-based portfolio companies sold in 2025 was 4.2 years, up from 3.9 in 2024, according to Mergermarket data.

“Many of these companies are likely below ‘A’ quality and still unlikely to match valuation expectations,” said Rentala.

One sector that saw healthy activity this year, both in terms of exits and buyouts, was technology. This was driven by the emergence of AI, which drove higher valuations in the sector, and this market disruptor is here to stay, said Arvindh Kumar, partner and co-head of technology at EQT Partners.

“Some companies are valued even more highly than they used to be because they’re taking advantage of AI and incorporating it into their business models, in terms of increased product innovation and internal efficiencies,” he said. “Others are caught flatfooted, either with CEOs that are not prepared or business models that are ripe for disruption.”

Among this year’s standout AI-related PE exits was April’s USD 4.4bn take-private acquisition of SolarWinds by Turn/River Capital, which saw its two largest owners, Thoma Bravo and Silver Lake, sell their shares.

Across the broader market, valuation challenges remain. Many firms cannot exit at their target prices because prospective PE buyers often face higher costs of capital than the current owners, noted Patrick Martin, national co‑leader of CBIZ Transaction Advisory Services.

“But the real challenge is that the valuation gap exists between buyers and sellers,” he said.

This gap has been one factor fueling an increase in continuation vehicles (CV) this year. In a recent survey by Lazard, 23% of respondents reported seeing more CVs involving assets in a recent M&A process than in 2024. Investors are becoming more discerning about the circumstances surrounding these deals, but the price‑discovery process can still help clarify asset values, according to a secondaries investor and a secondaries banker.

Despite the persistence of a valuation gap in many pockets of the market, most market participants told Mergermarket that the bid-ask spread has generally narrowed somewhat this year.

“Sellers have become a little bit more reasonable; buyers have become a little bit more aggressive,” said Brucato.

Advent’s Maldonado went further, saying that sellers are having to face reality when it comes to setting their valuation expectations and that we’re seeing a “reset with GPs.”

“I think the era of GPs taking their medicine may be upon us, particularly because it’s been well reported that fundraising has been down quite a bit over the last few years,” he said.

Activity hotspots

The services sectors continued to experience the most M&A exit activity this year as tariff-resilient business models proved an attractive quality for PE and strategic buyers alike.

From financial services, tech-enabled services, to business services and healthcare IT, these industries appealed to interested buyers thanks to predictable revenue flow, at a time when other areas were harder to assess.

Among recent highlights, HIG Capital sold wastewater treatment company United Flow Technologies to Berkshire Partners in early December, for around USD 1.4bn, according to sources.

In mid-December, Bain Capital agreed to acquire commercial HVAC company Service Logic from Leonard Green & Partners.

According to Rentala, services alone accounted for 52% of total US private equity exits, and together with technology accounted for 70% of overall activity.

“These sectors have been insulated from tariff-related headwinds and benefit from strong free-cash-flow conversion, steady growth, and being scalable platforms, positioning them as ideal candidates for leveraged buyouts and value creation,” he said.

In the mid-market tech segment, EQT’s Kumar said PE exit activity this year has been focused mainly on application software as buyers have sought businesses with downside protection to help withstand AI disruption.

“Geopolitical was a big risk at one point along with interest rates, and now AI is probably the biggest risk,” said Kumar. “How do you underwrite the impact of AI over the next 10 years? No one knows. For a lot of businesses, that’s a lot of uncertainty, and therefore, buyers priced that by paying less for a business.”

One of EQT’s notable technology exits was its sale of Acumatica, a provider of cloud enterprise resource planning solutions to small and mid-size businesses, to Vista Equity Partners in May.

For Max Thomas, founder of M&A advisory firm TBP Global Assets, one of the other standout areas was defense and national security.

“This sector is flourishing, largely due to ongoing geopolitical tensions and the consequent increase in government spending. With nations ramping up their defense budgets, private equity firms are finding plenty of opportunities to capitalize on this trend,” said Thomas.

Teed up for launch

Looking ahead, there is an expectation that the positive momentum seen in 2H25 will lead to an increase in PE exits next year.

“I think that 2026 could be the year of the Great Unlocking, with a big wave of exits,” said Advent’s Maldonado.

Macro conditions appear to be stabilizing, with further interest rates cuts also due for next year, while the IPO window is also looking a bit more receptive, he said.

“Most importantly, the internal pressure that the GPs are feeling from this big aging inventory is irresistible. So we have to sell,” added Maldonado.

MiddleGround’s Stewart expects strong PE exit activity in 1H26 as deals that didn’t come to market this year are being teed up for an early 2026 launch.

“I think it’s going to be like a tidal wave in the middle market of deal flow in 1Q and 2Q.  I think it’ll be near record levels,” said Stewart.

TBP’s Thomas also voiced cautious optimism. “There’s a real sense that recovery is on the horizon, especially since half of the private equity respondents are prioritizing exit activity in the coming months. That’s a promising sign,” he said.