U.S. economic policy slows down PE buyers

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a day ago

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Private equity dealmaking was in fairly good shape early this year, riding the momentum of an improved 2024. In fact, global deal value was the highest since the second quarter of 2022. Expectations for the coming months were high.
Then: 'The relatively upbeat start faded hours into the second quarter,' Bain & Co. said in its midyear PE report.
After the Trump administration's economic policy announcements on April 2, the value of deals announced that month was 24% below the monthly average for the first quarter, while deal count was down 22%. That data suggests a continued slump is likely in store for the PE market while investors digest the implications of the policy shifts, according to Bain.
Global private capital raises fell to $237 billion in the second quarter, from $339 billion in last year's second quarter and $290 billion in the first quarter of 2025.
The report noted that none of the PE buyout funds that closed in the first quarter were bigger than $5 billion — the first time in a decade that the quarterly threshold hasn't been surpassed.
The 18,000-plus private capital funds active today are collectively seeking $3.3 trillion, which means there is about $3 of demand for every $1 of supply.
While the 'entry' market was down, the 'exit' side dimmed as well. 'The already subdued market for initial public offerings essentially shut early in the second quarter, with offerings postponed or canceled amid the tariff turmoil,' Bain wrote.
After five years of shocks to investors that included the COVID-19 pandemic, the war in Ukraine, inflation and a spike in interest rates, 'tariff volatility hit just when [investors'] confidence in making predictions was starting to return,' the report noted. And now companies are also pressed by the increasing need to scale the rollout of generative AI.
Although strategic buyers often remain active amid economic turbulence, there's 'little prospect of the world returning to its pre-April 2 certainties, even if recent tariffs remain fully or partially rolled back,' Bain predicted.
The second-quarter slowdown may heighten difficulties stemming from a lack of liquidity in the market. Recent fundraising efforts 'are consistently lagging historical benchmarks when it comes to returning capital to limited partners,' Bain observed.
Unhappy limited partners are weary of partial exits and beginning to push for full, traditional ones, 'despite the headwinds faced by such transactions,' the report said. In a recent poll of Institutional Limited Partner Association webinar participants, 63% of them said they would prefer conventional exits over alternatives such as dividend recapitalizations, 'even accepting a valuation below recent marks if necessary.'