The stars are aligning for another year of robust growth in North American private equity dealmaking as market participants become increasingly confident amid volatile times, sponsors and advisors said.

“It is not a binary switch from 2025 where all of a sudden M&A’s going to shoot up, but I think that there is a continuous comfort level we’re seeing in sponsors that has been steadily building,” said James Schiro, managing director at Moelis.

Last year saw sponsor-backed M&A break a fresh record with USD 520bn in deal volume, rising 73% year-over-year to top the USD 495bn seen in the previous banner year of 2021.

Much of this volume was driven by deals on the larger end of the market. First among these mega deals was Silver Lake’s USD 56bn take-private of EA Sports with participation from Saudi Arabia’s Public Investment Fund and Affinity Partners. A joint bid by Blackstone and TPG to acquire Hologic for USD 19.6bn and Thoma Bravo’s move to acquire Dayforce for USD 12.5bn were among other large deals to hit the market last year.

In some sense, the situation mirrors last year, which began with optimism only to meet the uncertainty following broad changes to the US tariffs regime. Recently, despite heightened geopolitical tensions, many buyers seem to be adjusting to this volatility without it impacting their willingness to deploy. Sellers also seem to be “more realistic” about valuation expectations, said David Nowak, president of Brookfield’s private equity group.

“If you compare the number of geopolitical tensions that are current today to the past, we are seeing an unprecedented level of concern in all corners of the world, which normally rocks the markets, yet there is this sense of optimism that continues to carry the market forward,” said Nowak.

On the exit front, transaction volume shot up 59.8% to USD 387bn, the second highest year on record after the peak seen in 2021.

One boon for sponsor exits has been the gradual re-opening of the IPO route after years of hiccups. The year ended on a high-note with a much-anticipated IPO of Hellman & Friedman, Blackstone and Carlyle-backed Medline at a USD 6.3bn offering, and it followed other large sponsor-backed offerings that performed well like Blackstone-backed Legence and Apollo-backed Aspen Insurance.

The success of these names has fueled sponsor confidence in the public option. “Seeing an IPO like Medline definitely gives comfort with others as they are considering IPOs because it could be a barometer for increased activity,” said Schiro.

None of this is to say that obstacles do not remain. The middle market, though recovering, was hobbled longer by tariff-induced volatility than large-cap counterparts, as Mergermarket previously reported. One sponsor banker working with middle market GPs cautioned that uncertainty remains an issue for deal closings, even if mandates are plentiful. Overall deal count in 2025 fell by 9% on a year-to-year basis though exits held largely steady.

Nevertheless, sponsors need to deploy billions in unused dry powder as well as return capital to LPs. This should create steady deal flow, said market participants.

“Even though they’re not making the ultimate return that they want to make, the owner of that company also needs to come back to the market to raise new capital,” said Scott Voss, a managing director at HarbourVest Partners. “Those funds that need to come back to market need to show their investors some liquidity.”

Going private, carving up

For years, corporates have navigated a tricky macro environment, lately facing onshoring pressures and growing investor concern about how they are positioned for artificial intelligence.

With this, many public companies have opted to duck away from the public markets spotlight and go private. Last year, take-privates amassed USD 281bn in deal volume, the highest seen since before 2007. Indeed, the EA and Hologic deals are both take-privates, and other notable deals include Clearlake’s acquisition of Dun & Bradstreet.

The pace of take-private activity is expected to remain robust. “With rates and inflation normalizing and earnings having recovered, boards are now more willing to engage in the discussion,” said Brookfield’s Nowak. “There is a lot of capital in the private side of the market that will pursue these types of transactions.”

Shedding non-core businesses to streamline operations in the face of so much uncertainty has been another popular option. Faced with so much volatility last year, corporate divestitures were up 52% with USD 510.5bn in volume year-over-year.

AI is also expected to begin having an impact on take-privates as well as carve-outs, but market participants are divided to the exact extent. One middle market sponsor said that it remains too early to say how much AI is pushing corporates to do either. However, boards are facing more scrutiny around their AI story, and they may consider either option to execute without the spotlight of public market investors.

“Corporates are aggressively rationalizing their portfolios to eliminate operational clutter and sharpen their focus on core competencies. By shedding non-core assets through strategic carve-outs, they are generating the necessary capital to fund internal AI-driven projects,” said Greg Klein, partner at Simpson Thacher.

Secondaries to soar

Behind the resurgence of primary market activity has been a boon in deals in the secondaries market. Last year saw about USD 226bn in secondaries volume of which GP-led volume reached USD 106bn, up 51% year-over-year, according to Evercore.

In what may seem like a paradoxical twist, secondaries’ momentum is still expected to remain strong if standard exit activity picks up, said market participants. Over the years, ever larger pools of capital have formed to tap into this opportunity.

Early this year, Coller Capital announced a final close on its latest flagship secondaries vehicle with USD 17bn in commitments. Towards the end of last year, Carlyle AlpInvest closed a USD 20bn fund while Blackstone remains in the market for its next fund that should be at least as large as its USD 22.5bn ninth fund, executives said on its 3Q25 earnings call.

These large hauls indicate that LPs remain keen on maintaining exposure to secondaries. “A lot of LPs have just taken their primary capital that might have gone to buyout strategies and reallocate them to secondary strategies, so secondaries are taking market share,” said Voss from HarbourVest.

With larger war chests available, larger CV deals are also anticipated, building off last year’s traction. Among last year’s larger deals, New Mountain Capital is moving to complete an approximately USD 2bn CV for Azuria Water Solutions anchored by HarbourVest while TowerBrook is pursuing a CV for EisnerAmper worth between USD 1.2bn and USD 1.5bn that will be anchored by AlpInvest.

“The market now understands that there is the capacity to do deals that are upwards of USD 2bn, and there is a greater comfort level in putting deals of that size and scale out there,” said Gerald Cooper, co-head of secondaries advisory at Campbell Lutyens.

At the same time, large-cap CVs may be held back by the same factors limiting larger M&A deals. Even as large-cap deals drove deal momentum last year and the IPO window inched wider, the universe of buyers remains limited. This can translate into more activity in middle market CV deals, said Quinn Kolberg, a managing director responsible for GP-led secondaries at William Blair.

“The exit environment overall has created a lot of demand for middle market transactions where the exit options are perceived to be more plentiful, so I think there will continue to be increasing volume of middle market deals brought to market,” explained Kohlberg.