Bain & Company’s Global Private Equity Report 2026: Executive Summary

[MUSIC] Bane is just released its 2026 Global Private Equity Report. And at long last we're seeing unmistakable signs of recovery for some investors. Those are the ability to write the biggest checks and do the largest deals, definitely saw gains in deal activity in 2025 and in exits. But will the rest of the industry follow suit in 2026? With DPI at the low normal rates for the last five years, and with major macro uncertainties clouding the picture, it's difficult for LPs to really understand how their GP partners are doing in many instances. This contrasts with a prior period of zero central bank interest rates, stable GDP growth, and ever increasing multiples. In many ways, that earlier period masked the maturation of the industry. And we're beginning to see what that means. Today on the show, I'll share my key takeaways from Bane's 2026 Global Private Equity Report, including how the private equity industry may be facing an inflection point, and how today's volatile private equity markets may be indicative of what we're going to face over the next five or 10 years much more so than the past 10. I'm Jim McArthur, Chairman of Bane's Private Equity Practice, and this is Dry Powder. [MUSIC] Today's private equity annual report is themed gaining traction. But are we really? There are many instances in which it looks like private equity markets did do very well in 2025. That's undeniable. We had over $900 billion worth of deals done. That's the second biggest number ever to 2021, so lots of money going out and being productively put to work by GPs. We had over $700 billion worth of exits in 2025. That's one of the largest numbers ever for the exit market. So lots of money coming back in theory to LPs. We had $1.3 trillion raised for all private asset classes in 2025. That's the same number as 2024, so it didn't go down despite what many of us have been seeing and reading about the squeeze and fundraising. And the returns for the asset class, private equity in particular, were robust. So what is the issue here? Well, as usual, when you talk about private equity, you need to talk about things with nuance. Yes, there were $900 billion worth of transactions done in 2025, but the number of deals actually decreased by about 6%. How can that be true? Well, it can be true if we have a lot of very large deals. And in fact, we had 13 deals that were over $10 billion in unprecedented amount, including the largest deal ever, the $57 billion take private of EA. And so very few deals actually soaked up a lot of that capital in terms of the total enterprise value that was being deployed in 2025. Now, the first half of 2025 was quite stressed by tariffs and other macro issues. People worried about recessions, so not a lot of money was put to work. The last two quarters, if you're just looking for momentum, were actually incredibly strong. In fact, the third quarter of 2025 was the biggest quarter for deal making ever in the history of the industry. So definitely some good news there, but overall, the number of deals done declining is a little bump in the road. Now, what about that exit number I talked about? $700 billion plus in exits. Again, wonderful number, but number of exits down 2% in 2025 versus 2024. And again, the issue was very large deals. You were part of the medline IPO, or one of those other very large deals that was cashing out in some way. You did extraordinarily well. If you weren't part of one of those very large exits, then chances are you're still feeling relatively stressed. Now, let's turn our attention to fundraising. I mentioned that the total amount of fundraising for all private asset classes was $1.3 trillion in 2025, which is around the same number as 2024. And isn't that okay? Well, if you're in the buyout business, it wasn't okay at all because buyout fundraising was down 16%. It was down 16% because we continue to see the kind of stress in liquidity for traditional institutional investors that we've been seeing for the past four years. In 2025, it was yet another year of distributions to net asset value in buyouts being 15% or less. More like an eight-year capital cycle of year and LP. No LP writes their spreadsheets planning on eight years of capital deployment recycling. It's more like four. So having a fourth straight year, which is unprecedented, by the way, of it being less than 15%, is really straining most LP's ability to recommit to the industry because they need that liquidity back first. So buyout fundraising remains incredibly stressed. How could we be flat if the single biggest private equity asset class was down 16%. That was because there was a lot of excitement in other asset classes. In infrastructure, for example, you have durability and persistence of cash flows. Infrastructure is often reflected with long-term contracts that one can bet against. Obviously, AI is generating excitement everywhere. So whether you're talking about data centers or the energy sources to power those data centers, there are lots of places with long-term contracts to put capital. Energy in itself is an infrastructure sub asset class that's generating a lot of excitement. Both the transition from hydrocarbon to more green forms and renewable energy, but also back to hydrocarbon again because we need so much energy to power the AI revolution. Another area of infrastructure is this concept of reshoring or near-shoring, but taking supply chains and diversifying them and creating ecosystems of businesses for certain industries where they're going to be either closer to home base or back to home base. So numerous opportunities in the infrastructure space, again, attached to those long-term contracts that create predictability of cash flows or generating a lot of excitement among investors. The other area I'll call out that is was up substantially in terms of fundraising in 2025 as secondaries. Secondaries is a term I'm not even sure how long we're going to be using in the marketplace because it's really about liquidity. Yes, it's about LP-led secondaries. Yes, it's about continuation vehicles and GP-led secondaries, but it's also about bespoke, unique liquidity solution products that are growing at a breakneck pace. When you think about an alternative industry that has over $20 trillion worth of assets, and last year, a secondary business that provided $200 billion plus worth of deal flow, which by the way was an all-time record, $200 billion on $20 trillion just doesn't compute in a liquid set of asset classes. So that $200 billion number needs to get a lot bigger. And many investors realize this and those that are being innovative, those that are finding really attractive places to deploy capital are continuing to attract that capital. And that's a very market place. So while that $1.3 trillion number on the surface actually seems pretty solid. Underneath there are a lot of moving parts like the duck on the pond with a lot of churn, making it a more complex issue than simply saying fundraising was flat. Well, what about returns? Returns as I mentioned, certainly in the biode industry, for most things that were sold, were actually quite good. And so what's the problem there? Well, the problem there is we'd like to see more exits as I mentioned, exits were down. And secondly, the US stock market in particular has been roaring. In fact, the 10-year return for the US stock market measured by the S&P 500 is about the same as the average for private equity. And so why isn't everyone running and putting all their money in the US public equity, though? Well, once again, it's not as simple as that. If you look at 2025, just seven stocks, yes, the famous Mag 7, drove over 40% of all of the stock market gains. In fact, 17 stocks drove 75% of the S&P 500 gains. But how much money can you put into that before you say to yourself, well, wait a minute, I need some diversification here because if 17 stocks are driving 75% of my return, can I bet on that for the next five or 10 years? Or do I want to bet everything on that for the next five or 10 years? Is a very relevant question. And of course, most investors feel like for the historical, attractive returns that an asset class like private equity provides, you need that and you also want the diversification. Because the public markets are becoming more shallow, the average number of issues in the US public markets for equity are half what they were 30 years ago. And then there no one is forecasting that the number of public companies is going to increase dramatically over the next five or 10 years. Perhaps that'll happen. I don't know. But right now, as you look at the space, you certainly want to be invested in the US public markets, but you also want the kind of diversification and return access that the private markets and the private equity markets provide as well. So I think we are gaining traction as an industry in private equity and that traction will make itself evident in the first half of 2026 absent any black swans that none of us know about now. But we have been think also that this industry is hit in an inflection point. Let me start by describing this inflection point with some numbers. We're saying it bane that 12 is the new five. Now what does that mean? It means that EBITDA is going to have to roughly grow at something like 12% a year in the typical buyout in order to hit a 20% IRR versus the 5% EBITDA had to grow at about a decade ago. Now that's a reflection of the cost of debt, the amount of debt you can put on a deal, the average multiple and entering a deal, the average multiple and exiting a deal that we see in today's environment as compared to the environment a decade ago. Anyway, you slice it. It's going to be harder. Now let's unpack why 12 is the new five. We're seeing a K-shaped recovery if I can use that term. The elite platforms that are delivering both IRR and ROI are up, but many firms are stuck. The issue is what people thought was maybe a new normal in the industry was actually an anomaly and I'm talking about the 10 year period where central bank interest rates were zero and year after year, debt was cheap, GDP growth was positive and therefore I had kind of a built in multiple expansion mechanism going as the next buyer could have the same interest coverage and pay a higher multiple that I had entering a business and with multiple expansion returns were great. So we had an unprecedented decade of zero central bank interest rates that helped power the industry and it also did something very important. It masked the maturation of this industry because over that 10 year period, the size of the buyout industry tripled and the competitive intensity became much, much greater. But in probably the most benign times possible, the returns masked all that and now that we're back two times of real interest rates that aren't zero and we're back two times of having some macro upheaval in the marketplace. It's very unclear who the winners and who the losers are going to be, but what is clear is that prices are up, competition is going to keep the prices up and that investors now need a strategy in order to become a long term winner in this industry and that's why we're at an inflection point. So what are some signs that we're in a more mature industry now and buy out? Number one, I'd argue that it's more expensive to generate alpha than ever before. It is pricey out there whether you're talking about investing in greater sub sector expertise, sourcing, technology and AI, better value creation, ecosystems, better advisory networks, you name it, the cost is up. Oh, and by the way, raising capital is going to be a lot of money. It's going to be a lot of money. Revenue is measured by fee-bearing AUM. Many investors are dealing with a natural discount, if you will, by having their AUM go up. But by having fees not go up commensurately because co-invest typically does not come with economics attached to it. Put that in combination with some of the largest LPs that are writing checks. Don't want to pay the number on the book and don't expect to. They expect to pay a lesser number for a much bigger check. And you've got revenue pressure on GPs as well. So cost-pressure, revenue-pressure, pressure to generate alpha means mature industry. Now, that's not a bad thing. That's not a reason to go running panicking into the streets. But what it does mean is you absolutely need to have a strategy as a GP for the first time in this industry. Now, a strategy, in my view, addresses three things. GPs compete for talent. They compete for capital. And they compete for deals. Those are the three things. And the time has come for every GP to boldly state its ambition and then to create real plans to achieve a strategy that allows access successfully to all three of those things. The best talent, the deal opportunities that are most appropriate for that GP and the capital to fuel both of them. Now, the reason why this is important is because generating alpha is going to be more difficult than it has before. And that means you need a repeatable differentiated model in order to succeed with real modes built around it that are going to prevent competitors from coming and poaching your deals or poaching your sources of capital or poaching your talent. And that can take many forms. You might be a sector expert. You might underwrite certain types of investment these and opportunities better and more often than anybody else. You might do any number of things on the value creation side that others fear to tread in doing. But whatever it is, it needs to hang together as a model. It needs to be focused on a total addressable market that's big enough to allow the investment world to believe that you can continue to do it year after year because let's not forget. Private equity is the longest running business and it takes a long time to figure out whether you're winning or losing in most cases. And so therefore, these things need to be provable both in what you say, but also in the deals that you've done. So what does that mean in practice? That means number one, I need to get a lot more proactive about my sourcing. If I have a real strategy and a real focus, that means I'm not waiting for a thousand Sims to come in the door anymore and find the two or three that I like the best and close those deals at the end of the year. I need to begin building my own pipeline of assets that I want to own perhaps years before those assets come to market, but I learn about them. And when they do come to market, I have the confidence of moving fast at the right price and be the winner because those deals should be my deal. So building your own pipeline versus waiting for the Sims to come in the door is the name of the game when it comes to developing a real competitive edge in sourcing. Underwriting. Underwriting is now much more about full potential due diligence than ever before. That means commercial due diligence needs to work together with operational due diligence, which needs to work together with technological due diligence, including AI, all of those need to work together to form a value creation plan that means on day one, you can start to get speed to value. Speed to insight is about underwriting and diligence and learning and stagegating and making sure that all of those avenues of value that you're so good at getting because you're focused are really there in an asset. And then quickly flipping the switch in the diligence process. So that on the first day of ownership, you're ready to go and get that speed to value and make sure that you get that EBITDA growth as fast as humanly possible. That's the name of the game in differentiated underwriting. And then of course, there is the muscle, the ecosystem to actually execute on the value creation plan to hit go the day that you own that asset because time is your enemy. There's a lot of change in the macro economy. There's a lot of change in different industries driven by AI and other types of disruptions. So the faster you get EBITDA wins on the table, the faster you're on the path to successful returns and generating alpha. If you'd like to read the full 2026 Global Private Equity Report, click on the link in the episode notes. I'd also encourage you to join me for a global webinar on March 5th, where I'll dive deeper into many topics such as the complexity of exits, the development of exit channels in 2026, and what real differentiation and alpha generation look like in the GP world. If you'd like to sign up, please click on the link in the episode notes. I'm Humek Arthur. Thank you for listening. [MUSIC]