Private Capital Year in Review 2025

December 19, 2025

Welcome to this week’s edition of The Private Capital Compass, brought to you by Private Capital Global (PCG), a Sparc Group company. This special edition provides a look back on the top reports, stories, transactions, and other content from throughout the year. 

This edition examines ten of the top reports published throughout the year with a brief explanation of the story told by each. Private Capital Global’s Editorial team carefully selected each of the stories to paint a clear picture of the year 2025, along with some expectations for 2026.

This week’s deep dive spotlights our top five themes that shaped this year’s market, and how operating partners and deal teams have worked together to address challenges posed by extended hold periods and increased pressure from LPs. We then close the year out with some suggestions for success as you enter the new year.

The Weekly Shortlist | Stories of the Week

Compass Points

Key insights at a glance:

  • Private Equity Enters 2026 with Momentum, Innovation, and Strategic Optionality: According to EY’s Private Equity Trends 2026 report, the private equity industry enters the coming year with renewed confidence, shaped by stronger operating models, expanding investor access, and deeper integration of technology across the investment lifecycle. The report highlights private credit’s continued ascent, the transformation of value creation through AI and data, and a rapidly diversifying LP base that now includes retail, retirement, and sovereign capital. At the same time, exit conditions are stabilizing, marked by a rebound in PE-backed IPO, while continuation funds and creative deal structures remain essential tools. Sector-wise, EY points to sustained opportunity in technology, industrials, and insurance, as firms prioritize resilience, infrastructure, and long-term earnings visibility. Collectively, the findings underscore an industry moving beyond adaptation toward actively reshaping its future through scale, innovation, and disciplined execution. 

  • US Private Equity Enters 2026 with Rising Inventory, Slower Realizations, and Increasing Fund Concentration: Pitchbook’s latest report shows the U.S. private equity market entering 2026 with cautious optimism amid pressure from an aging portfolio backlog and uneven exit activity. Although deal flow and exit values improved in 2024 and 2025, recovery remains uneven: nearly 13,000 PE-backed companies remain in inventory, with 30% now seven years or older—reflecting extended hold periods and slower monetization. Vintage cohorts from the downturn, particularly 2017 and 2021, continue to trail historical norms, highlighting the challenge of clearing accumulated assets. At the same time, capital formation is increasingly concentrated among the largest PE managers, while first-time funds reach record lows. Renewed rate cuts, stabilizing markets, and a gradually reopening IPO window are supporting sentiment, but exit activity will need to accelerate materially to relieve pressure. Overall, 2026 is shaping up as a transitional year, marked by improving dealmaking conditions, a stronger focus on realizations, and structural trends favoring scale in fundraising.

  • Private Equity Dealmaking Persists Amid Higher Barriers and an AI-Driven Reset: PwC’s 2025 Mid-Year Outlook on Global M&A Trends finds private equity continuing to drive deal activity despite a more demanding operating environment defined by elevated capital costs, uneven exit markets, and regulatory uncertainty. Buyout activity strengthened in early 2025, with capital flowing toward assets demonstrating resilient earnings and clear strategic relevance. Firms are responding by refining—not retreating—their approach: deploying AI to enhance diligence and portfolio performance, leaning on private credit and secondary structures to manage liquidity, and pursuing cross-border opportunities where valuations and policy conditions are more favorable. PwC also points to accelerating sector convergence around AI infrastructure, energy, and digital platforms, as well as renewed efforts to broaden private market access through retirement-oriented products. Together, these trends reflect a private equity market that is becoming more selective, more operationally sophisticated, and increasingly positioned to capitalize on improving conditions.

  • Market Recovery and Fund-Raising Dynamics: The 2025 Global Private Equity Report from Bain & Co., published in Q1 as a recap of 2024, highlighted a rebound in dealmaking after two years of decline, with global buyout investment value up 37% and exits up 34% in 2024, while fund-raising fell 23% due to ongoing liquidity constraints among limited partners. Deal growth was driven by easing interest rates, improved macro conditions, and support from private credit, with average deal sizes reaching historic highs and large public-to-private transactions dominating. Regional trends varied: North America rose 34%, Europe 54%, and Asia-Pacific 11%, while technology remained the largest sector by value. The report emphasized that capital continues to favor top-tier funds with strong track records, with general partners using strategies such as dividend recaps, minority sales, and NAV-based loans to manage liquidity, signaling that future fundraising will increasingly reward differentiated, high-performing managers.

  • Operational Alpha as the Next Frontier in Private Equity Value Creation: The 2025 KPMG PE Value Creation report highlights a fundamental shift in value-creation strategies as traditional levers lose effectiveness amid higher interest rates, inflation, geopolitical volatility, and technological disruption. Drawing on a global survey of 500 PE leaders, the report emphasizes that firms must now adopt structured, data-driven approaches to generate operational alpha by systematically improving EBITDA, early identifying value opportunities, implementing disciplined portfolio transformations, and enhancing change management. With more than $3 trillion in unsold assets, longer holding periods, and increased scrutiny from limited partners, the report argues that next-generation “quant PE houses” capable of executing operational excellence at scale will differentiate themselves, restore sustainable returns, and maintain competitiveness in a complex, evolving market.

  • PE Shifts from Margin Enhancement to Growth Through Technology: FTI Consulting’s 2025 Private Equity Value Creation Index shows that in a market of longer hold periods, rising rates, and valuation pressures, traditional cost-cutting alone is no longer enough. High-performing PE firms are turning to underutilized levers, AI, product and market expansion, sales force effectiveness, and churn prevention, while continuing to execute reliably on conventional tools like Technology & IT, cost structure, and working capital. Execution discipline, alignment between sponsors and management, and thoughtful deployment of technology and growth strategies are now critical differentiators. Firms that pair operational rigor with data-driven, tech-enabled levers are better positioned for long-term value creation and exit success, signaling a strategic shift from short-term fixes to sustained, measurable impact.

  • Healthcare PE Midyear 2025: IT Deals Surge Amid Regional Shifts: Bain & Company’s Midyear PE Healthcare 2025 update shows global healthcare buyout deal value slightly lagging 2024, with North America softening and Asia-Pacific driven primarily by India and Japan. While medtech and biopharma saw declines, healthcare IT deals surged, fueled by high-multiple “gem” assets, policy-insulated opportunities, and AI applicability. Europe remained steady, and optimism persists for H2 as large deals close, delayed transactions reemerge, and abundant dry powder supports continued activity.

  • Family Offices Emerge as Strategic Platforms for Wealth, People, and Legacy: A recent report from IMD’s Global Family Business Center examines how family offices are redefining their role as the families behind them grow, generations change, and the pace of economic and social transformation accelerates. Based on global research that combines academic rigor with real-world family perspectives, the report highlights a shift away from narrow financial administration toward broader, family-first mandates. Increasingly, family offices are serving as platforms for education, professional development, well-being, and long-term resilience, reflecting a more holistic approach to wealth management. The findings suggest that leading family offices are investing not only in financial assets but also in human, social, and intellectual capital, positioning them as strategic stewards of legacy and catalysts for sustained family continuity.

  • Generative AI Redefines Venture Capital Economics, Expectations, and Differentiation: An article from Harvard Business Review explores how generative AI is rapidly reshaping the venture capital landscape, influencing everything from how startups are built and funded to how VC firms themselves operate. The analysis highlights a sharp rise in AI-driven efficiency, enabling startups to scale faster with smaller teams and less capital, while simultaneously raising the bar for execution, speed, and technical maturity at the pitch stage. As AI capabilities become increasingly commoditized, investors are shifting their focus toward defensible data assets, AI-native architectures, founder–market fit, and learning agility. Despite these structural shifts, the human dimension of venture investing, trust, judgment, and founder leadership, remains central. Taken together, the piece points to a venture ecosystem in transition, where technological leverage is accelerating outcomes, but durable advantage still rests on execution quality and human insight.

  • Private Credit’s Expansion Redefines the Competitive and Risk Landscape for US Banks:  A special report from Moody’s examines how the rapid growth of private credit is reshaping US bank lending, competition, and risk exposure. The analysis highlights a decade-long surge in private credit assets under management, driven in part by post–financial crisis regulation that has pushed lending activity toward alternative managers. As banks respond, many are expanding lending to non-depository financial institutions and forming partnerships with private credit providers, effectively financing both competitors and clients. While this strategy offers diversification benefits, the report underscores rising concerns around underwriting discipline, concentration risk, and transparency, particularly for smaller banks with outsized exposures. As private credit continues to scale and intertwine with the banking system, the findings point to a more complex credit ecosystem in which growth opportunities are increasingly accompanied by heightened risk-management demands.

Deal of the Week: Cencora Bets Big with $5B OneOncology Acquisition

Transaction: Cencora (formerly AmerisourceBergen) has entered into a definitive agreement to acquire a majority stake in OneOncology, valuing the community oncology platform at approximately $7.4 billion in enterprise value. The transaction accelerates Cencora’s path to control by buying out private equity firm TPG’s equity stake, while OneOncology’s affiliated practices and management team will retain a meaningful minority interest. Founded in Nashville, OneOncology operates a physician-led network of 31 independent community oncology practices, encompassing roughly 1,800 providers across 365 care sites nationwide. The platform has expanded rapidly through acquisitions, including its recent purchase of GenesisCare’s Florida operations. For Cencora, OneOncology serves as both a strategic growth engine and a distribution channel for pharmaceuticals, care navigation tools, and operational and clinical support services, further deepening the company’s exposure to specialty care.

Why It Matters: The deal highlights the strategic value of specialty practice networks as critical infrastructure in the healthcare ecosystem. Control of OneOncology gives Cencora influence, embedding its distribution, technology, and support services directly into the point of care. As drug therapies become more complex and site-of-care decisions matter more, owning or controlling these platforms creates tighter integration and stickier economics than traditional wholesale models alone. OneOncology’s reported valuation at nearly 20x trailing earnings reflects sustained investor appetite for scaled, physician-aligned platforms with national reach. Despite a slower M&A environment in parts of healthcare, assets that combine clinical density, recurring revenue, and strategic optionality continue to command premium multiples, particularly when backed by strong growth narratives and clear synergies.

The deal intensifies the “specialty arms race” among the Big Three drug distributors. Cencora’s move follows its $4.6 billion acquisition of Retina Consultants of America and mirrors the aggressive investments of Cardinal Health and McKesson across oncology, GI, urology, ophthalmology, and other specialties. These transactions are reshaping competitive dynamics, pushing distributors beyond logistics into ownership-adjacent models that blend services, data, research, and clinical trials. Finally, from a policy and market-risk perspective, the timing suggests improving confidence in oncology reimbursement and in Medicare Part B drug pricing beyond 2028. As uncertainty clears, strategic buyers appear increasingly comfortable underwriting long-duration growth in oncology, making this deal not just a bet on OneOncology, but a broader vote of confidence in the future of specialty care.

Deals of the Year | 12 Days of Deals

Deep Dive: 5 Trends That Shaped 2025

Market conditions have strengthened meaningfully after several years of volatility, and with that improvement comes a clearer, more durable path forward for private capital. While the operating environment has evolved, with longer hold periods, greater capital concentration, rapid technological progress, and a more prominent policy landscape, these shifts are opening new avenues for disciplined value creation and sustained outperformance. Drawing on a year of in-depth dialogue with operating partners, deal teams, and portfolio executives, Private Capital Global identified five defining themes that not only shaped the industry in 2025 but also point to where the most prepared firms are positioned to win as the market moves into 2026.

1. A Market Reset: Improving Conditions, Structural Pressure

Financing costs have eased, exit channels are gradually reopening, and leveraged buyout spreads have compressed to post-GFC lows, creating conditions for a rebound in platform buyouts. Yet beneath these encouraging signals lies a significant inventory challenge: nearly 12,900 PE-backed companies remain in portfolios, with roughly 30% held for 7 years or more. This overhang has redefined the private equity value creation cycle. The traditional model, acquire, optimize, exit within four to five years, has given way to multi-cycle ownership strategies that demand sustained operational excellence. Value must be created continuously through operational improvement, digital enablement, and commercial reinvention over extended hold periods.

Fundraising dynamics further reinforce this shift. Capital has consolidated around established platforms, with the ten largest funds capturing nearly half of all capital raised in 2025. LPs are prioritizing scale, liquidity, track records, and diversification, enabling well-capitalized sponsors to fund long-term, high-ROI initiatives. Smaller managers, by contrast, face pressure to demonstrate capital efficiency, measurable progress, and disciplined execution at every stage of ownership. Continuation funds illustrate how the market has matured. Once viewed primarily as stopgap liquidity solutions during the exit drought of 2023–2024, they are now strategic tools for extending ownership of high-potential assets, particularly those undergoing digital or AI-driven transformations. Leading sponsors are using continuation vehicles not to wait out the market, but to build businesses capable of commanding premium valuations when exit windows reopen.

2. Value Creation Becomes a System, Not a Set of Initiatives

Extended hold periods, now averaging nearly 6.7 years, have placed systematic value creation at the center of private equity returns. Across PCG’s conversations in 2025, operating partners consistently emphasized that sustainable outperformance depends on a tightly integrated playbook spanning four domains: finance, technology and AI, human capital, and complementary operational levers such as commercial strategy and procurement.

Finance remains the foundation, but its role has expanded significantly. High-performing portfolio companies now focus on working capital optimization, free cash flow generation, and forward-looking decision support rather than backward-looking reporting. CFOs are increasingly positioned as strategic partners, leveraging tools such as scenario-based covenant modeling, AI-driven cash forecasting, and ESG-linked financing structures to navigate volatility and enhance exit readiness. Execution discipline continues to separate top-quartile performers from the rest.

Human capital has emerged as the critical multiplier. Data consistently shows that strong leadership teams drive materially higher exit multiples, particularly as ownership periods lengthen. Yet talent strategy remains underdeveloped at many firms. Leading operating partners advocate for rigorous leadership assessments within the first 90 days, organizational designs aligned with value-creation priorities, and incentive structures that reward long-term performance rather than short-term fixes.

3. AI Shifts From Debate to Execution Discipline

Technology and AI have moved beyond experimentation. Predictive analytics, automation, and dynamic pricing are delivering measurable improvements across both revenue growth and margin expansion. The firms seeing the greatest impact are those that establish operator-led centers of excellence to standardize deployments, share learnings, and accelerate time-to-value across portfolios. Embedding AI capabilities within the first 12 to 18 months of ownership creates compounding advantages that persist throughout the hold period.

Successful AI programs treat technology as an organizational capability rather than a point solution. This requires leadership alignment, cross-functional collaboration, data infrastructure, and change management that reshapes workflows alongside new systems. Without this alignment, even technically sound AI implementations can fail to generate meaningful ROI. AI’s greatest impact may be its role as a force multiplier for human capital. Automating high-volume, rules-based tasks enables teams to focus on judgment-driven, value-creating work. Early gains are often seen in engineering and product teams, followed by finance, operations, and customer-facing functions as adoption matures. Portfolio companies that invest early in data foundations, third-party partnerships, and proprietary analytics position themselves to scale intelligence without linear cost growth.

Read the Original Blog: Harnessing AI for Scalable Value

4. Middle-Market Medtech and Industrials Take Center Stage

Sector dynamics in 2025 revealed clear pockets of opportunity, with middle-market Medtech emerging as a standout. Demographic tailwinds from an aging population, combined with regulatory complexity and fragmented markets, have created fertile ground for buy-and-build strategies. Private equity sponsors are assembling scaled platforms by combining niche device manufacturers, AI-enabled diagnostics, and digital health capabilities, driving both growth and multiple expansion.

Private credit has filled gaps left by traditional lenders, enabling creative structures such as unitranche loans and seller rollovers. These tools have broadened access to capital across sponsor sizes while supporting complex transactions in a highly regulated sector. However, success in Medtech continues to hinge on rigorous diligence, regulatory readiness, and the quality of the management team. Beyond healthcare, industrial and manufacturing assets gained renewed attention in 2025. Supply chain resilience, operational improvement potential, and consolidation opportunities have drawn investor interest.

5. Government Policy Becomes a Core Investment Variable

Lower interest rates provided relief and reignited deal activity, but regulatory, tax, and geopolitical considerations increasingly shape investment decisions. Engagement with policymakers, regulators, and trade dynamics has become a strategic necessity rather than a peripheral concern. Firms that integrate policy awareness into diligence, portfolio strategy, and capital deployment are better positioned to unlock value and mitigate risk. This includes anticipating regulatory shifts, adapting to evolving labor and tax frameworks, and building operational resilience for portfolio companies with cross-border exposure.

Compass Call: Leading Through Extended Holds and Elevated Expectations

Extended hold periods, improving financing conditions, and a reopening of exit markets create a powerful backdrop, but only for those prepared to act with intention. This is the moment to elevate value creation from a series of initiatives into a fully integrated operating system. Finance, technology, talent, and commercial excellence can no longer operate in silos. When aligned, these levers compound over time, strengthening resilience, accelerating growth, and positioning assets to outperform whenever exit windows open. 2026 also demands execution discipline. AI adoption must move beyond pilots to embedded capability. Talent strategy must shift from reactive to proactive. Operating cadence, KPI visibility, and decision-making rigor should be built early and reinforced continuously. Portfolio leaders who invest in strong foundations during the first year of ownership will create advantages that persist across multi-cycle holds.

For deal teams: diligence and underwriting must reflect the realities of extended ownership and operational value creation. Understanding management depth, digital readiness, regulatory exposure, and capital flexibility is no longer optional; it is central to protecting and enhancing returns. The most successful investors will be those who partner early and often with operators to translate strategy into measurable results.

Thank you for joining us for this week’s edition of The Private Capital Compass and for being part of our final newsletter of 2025. As the year comes to a close, we sincerely thank you for your continued engagement, trust, and support throughout our inaugural year. The dialogue and collaboration across the Private Capital Global community are what make this platform possible, and we are grateful to share in that journey with you.

As we look ahead to 2026, we’re energized by the momentum building across the private capital ecosystem and by the conversations and connections already taking shape at our upcoming events in Austin, Boston, Chicago, London, New York, and San Francisco. The year ahead presents meaningful opportunity, and we look forward to continuing to convene operating partners, deal teams, and portfolio leaders around the insights and strategies that drive real value creation.

For deeper perspectives throughout the year, be sure to subscribe to The Private Capital Insiders Podcast, hosted by our President & CEO, Frank Scarpelli, where leading dealmakers and operators share firsthand insights on today’s evolving private capital landscape.

Our commitment remains unchanged: to keep you informed, connected, and equipped with the analysis, intelligence, and community needed to translate market insight into actionable value across your investments and portfolio companies. From all of us at Private Capital Global, we wish you and your teams a joyful holiday season and a healthy, prosperous New Year. We look forward to continuing the conversation in 2026.

Opening & Closing Remarks from Erik Boender, Vice President & COO, Private Capital Global (a Sparc Group company)

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