Private equity in 2025: Trends shaping the market

The private equity sector is facing a crossroads in 2025. Following a challenging 2023 that saw declining transaction volumes and tough financing conditions, there were clear signs that optimism was returning towards the end of 2024. According to a recent KPMG study, most market participants anticipate a significant pick-up in M&A activity in 2025, especially in private equity.

Exits and IPOs are coming back
The number of exits was lower in 2023 than it had been in more than a decade. With interest rates stabilising and capital markets recovering, the number of IPOs and company sales has picked up again: 211 IPOs were executed in 2024, compared to 158 the year before.

Growth in the mid-market segment
Deal activity has picked up noticeably in the mid-market segment that comprises enterprises with values between 100 and 500 million euros. Valuations in this segment are relatively moderate and many family-owned businesses are looking for a successor. According to a recent study conducted by KfW, around 250,000 small and medium-sized enterprises will require a succession arrangement between now and 2026. 11,000 of these businesses are within DBAG’s core segment.

Semi-liquid funds: Flexibility for investors
A growing number of investors are looking for more flexible products. Semi-liquid private equity funds that allow for quarterly returns have been gaining in importance: their volumes saw a 23 per cent increase in 2024. 

Rising valuations
Entry multiples in the private equity sector have been rising in line with the recovery on stock markets. The average EBITDA multiple for US buyouts recently reached 12.1x – an increase of 1.2 points compared to 2023.

Attractive development of private debt
Demand for alternative financing solutions is growing. With a global volume in excess of 1.7 trillion US dollars – projected to rise to 4.5 trillion by 2030 – private debt is a key market segment, also in view of refinancing needs running into the quadrillions. In Germany, Austria and Switzerland (the “DACH” region) alone, more than 600 billion euros in refinancing will be required, creating attractive opportunities for private debt funds – and hence for ELF Capital, DBAG’s private debt business. 

Secondaries with record volumes
Trading activity in existing fund units hit a record volume of 132 billion US dollars in 2024, equivalent to 10 per cent of aggregate fundraising volumes.

Focus on technology and healthcare
Technology and healthcare remain key growth drivers, together accounting for 41 per cent of all private equity investments in 2024.

Digital transformation and AI
Private equity firms are increasingly relying on digital tools and artificial intelligence. Applications include deal sourcing support with more efficient processes and faster due diligence. 

Growing importance of co-investments
A growing number of investors directly invest in deals in order to allocate their capital more efficiently. The volume of such co-investments has risen by 18 per cent in 2024. 

The private equity sector is resilient and innovative. 46 per cent of European investors are looking to increase their activity in 2025 compared to the previous year. Virtually all German institutional investors (98 per cent) plan to grow their exposure over the next five years. The trends outlined clearly show that private equity remains a key component of return-oriented and forward-looking portfolios.