Private equity US market insights and trends

PE Pulse: explore US industry market trends and what private equity leaders are focusing on in 2025.

PE sees an active first quarter, but rising trade tensions are leading to increased caution.

PE activity experienced its second-highest quarter in nearly two years, as US PE deal value¹ rose by more than 50% in Q4 versus a year ago, while volume increased nearly 40%. January and February showed strong activity due to favorable financing conditions and a desire to utilize the estimated US$1t in dry powder.

Rising trade tensions and associated uncertainty are leading to caution among investors. If the tariffs scenario announced on April 2 remain indefinitely, EY-P modeling* shows this could lead to stagflation, with a drag on US real GDP growth worth 1 percentage point (ppt) in 2025 and a 0.4ppt drag on growth in 2026. Currently, nearly three quarters of global GPs expect tariffs to have a moderate negative impact on deployment activity over the next 3-6 months. Most global GPs — 87% of PE Pulse survey participants — are assessing the potential impacts of tariffs on their portfolio’s supply chain.

Institutional lending for LBOs remained robust, with loan issuance for PE acquisitions increasing by 73% in Q1 2025 compared to Q4 2024, reaching ~US$39b, the highest in three years. Exit values reached US$89 billion in Q1, the highest since Q2 2022, driven by renewed corporate acquirer interest, ample dry powder for secondary transactions, and extended hold periods with nearly 4,000 US PE-backed firms held for over five years.

Technology continued to dominate deal volumes, and as macro headwinds mount, PE investors may pivot toward sectors aligned with geopolitical changes. Market shifts can lead to opportunistic activity, particularly strategies with long-term tailwinds:

Aerospace and defense, along with US-based manufacturing, could attract significant capital as GPs focus on areas prioritized by the current Administration.
Take privates could increase if public market volatility persists.
Private credit tends to excel during market dislocations when “traditional” financing sources are less available, benefiting credit funds if syndicated debt buyers withdraw due to uncertainly.
Opportunities will arise in domestic middle-markets, particularly in areas with limited cross-border exposure, like US-based manufacturing.
Add-ons: Firms have reduced add-on deals this year, accounting for 53% of US PE transaction volume, down from 62% in 2023. However, increased volatility could see renewed attention, particularly if firms shift away from larger, more complex platform deals.

Despite tariff concerns, deal value¹ in 1Q25 increased 53% vs 4Q24 as GPs capitalised on market volatility, ease in regulation pertaining to consolidation and ~US$1t dry powder.

PE investment value-volume (US$100m and above):

In 1Q21, PE deal value is US$132b with 114 deals.
In 2Q21, PE deal value is US$162b with 96 deals.
In 3Q21, PE deal value is US$140b with 95 deals.
In 4Q21, PE deal value is US$125b with 77 deals.
In 1Q22, PE deal value is US$133b with 77 deals.
In 2Q22, PE deal value is US$121b with 72 deals.
In 3Q22, PE deal value is US$70b with 54 deals.
In 4Q22, PE deal value is US$55b with 40 deals.
In 1Q23, PE deal value is US$70b with 39 deals.
In 2Q23, PE deal value is US$64b with 43 deals.
In 3Q23, PE deal value is US$73b with 43 deals.
In 4Q23, PE deal value is US$41b with 34 deals.
In 1Q24, PE deal value is US$76b with 39 deals.
In 2Q24, PE deal value is US$83b with 52 deals.
In 3Q24, PE deal value is US$97b with 63 deals.
In 4Q24, PE deal value is US$61b with 50 deals.
In 1Q24, PE deal value is US$93b with 49 deals.

Rising trade tensions and associated uncertainty are leading to increased caution among investors.

What are you currently doing in order to prepare for a potential widespread increase in new tariffs?²

Helping our portfolio companies understand the potential impacts on their supply chain: 70% in Dec-24 and 87% in Mar-25
Evaluating our portcos’ manufacturing footprints: 40% in Dec-24 and 57% in Mar-25
Helping our portfolio companies sketch out the potential tax issues: 30% in Dec-24 and 47% in Mar-25
Considering add-ons or other transactions in jurisdictions with less exposure: 40% in Dec-24 and 30% in Mar-25.
Considering accelerating transactions (for example, acquisitions or exits in strategic sectors, or with significant international exposure): 33% in Dec-24 and 17% in Mar-25.
Undertaking a programmatic approach (for example, establishing a centralized team or office) to holistically understand the impacts across the portfolio: 30% in Dec-24 and 10% in Mar-25

Cost of debt rose amidst increased volatility and uncertainty.

Average spread and Yield-to-maturity of M&A loans

In Mar-22, average spread is 433 and YTM is at 6%.
In Apr-22, average spread is 437 and YTM is at 6%.
In May-22, average spread is 493 and YTM is at 8%.
In Jun-22, average spread is 487 and YTM is at 8%.
In Jul-22, average spread is 519 and YTM is at 9%.
In Aug-22, average spread is 420 and YTM is at 8%.
In Sep-22, average spread is 415 and YTM is at 9%.
In Oct-22, average spread is 467 and YTM is at 11%.
In Nov-22, average spread is 508 and YTM is at 11%.
In Dec-22, average spread is 465 and YTM is at 11%.
In Jan-23, average spread is 455 and YTM is at 11%.
In Feb-23, average spread is 469 and YTM is at 11%.
In Mar-23, average spread is 475 and YTM is at 11%.
In Apr-23, average spread is 441 and YTM is at 10%.
In May-23, average spread is 443 and YTM is at 11%.
In Jun-23, average spread is 433 and YTM is at 10%.
In Jul-23, average spread is 434 and YTM is at 11%.
In Aug-23, average spread is 471 and YTM is at 12%.
In Sep-23, average spread is 410 and YTM is at 10%.
In Oct-23, average spread is 459 and YTM is at 11%.
In Nov-23, average spread is 453 and YTM is at 11%.
In Dec-23, average spread is 378 and YTM is at 10%.
In Jan-24, average spread is 420 and YTM is at 10%.
In Feb-24, average spread is 392 and YTM is at 10%.
In Mar-24, average spread is 385 and YTM is at 10%.
In Apr-24, average spread is 360 and YTM is at 9%.
In May-24, average spread is 322 and YTM is at 9%.
In Jun-24, average spread is 373 and YTM is at 10%.
In Jul-24, average spread is 349 and YTM is at 9%.
In Aug-24, average spread is 375 and YTM is at 9%.
In Sep-24, average spread is 361 and YTM is at 9%.
In Oct-24, average spread is 380 and YTM is at 9%.
In Nov-24, average spread is 403 and YTM is at 9%.
In Dec-24, average spread is 397 and YTM is at 9%.
In Jan-25, average spread is 324 and YTM is at 8%.
In Feb-25, average spread is 307 and YTM is at 8%.
In Mar-25, average spread is 372 and YTM is at 9%.

US$39b of institutional term loans were raised (three-year high) to finance PE-backed deals during 1Q25.

M&A-related loan volume ($USb)

In 3Q17, LBO is US$32b and sponsored add-on is US$21b.
In 4Q17, LBO is US$11b and sponsored add-on is US$12b.
In 1Q18, LBO is US$26b and sponsored add-on is US$17b.
In 2Q18, LBO is US$30b and sponsored add-on is US$30b.
In 3Q18, LBO is US$41b and sponsored add-on is US$22b.
In 4Q18, LBO is US$22b and sponsored add-on is US$13b.
In 1Q19, LBO is US$31b and sponsored add-on is US$14b.
In 2Q19, LBO is US$15b and sponsored add-on is US$10b.
In 3Q19, LBO is US$24b and sponsored add-on is US$12b.
In 4Q19, LBO is US$20b and sponsored add-on is US$5b.
In 1Q20, LBO is US$20b and sponsored add-on is US$9b.
In 2Q20, LBO is US$12b and sponsored add-on is US$3b.
In 3Q20, LBO is US$12b and sponsored add-on is US$7b.
In 4Q20, LBO is US$23b and sponsored add-on is US$16b.
In 1Q21, LBO is US$37b and sponsored add-on is US$19b.
In 2Q21, LBO is US$43b and sponsored add-on is US$18b.
In 3Q21, LBO is US$46b and sponsored add-on is US$27b.
In 4Q21, LBO is US$20b and sponsored add-on is US$32b.
In 1Q22, LBO is US$41b and sponsored add-on is US$17b.
In 2Q22, LBO is US$19b and sponsored add-on is US$8b.
In 3Q22, LBO is US$11b and sponsored add-on is US$2b.
In 4Q22, LBO is US$2b and sponsored add-on is US$3b.
In 1Q23, LBO is US$5b and sponsored add-on is US$5b.
In 2Q23, LBO is US$8b and sponsored add-on is US$5b.
In 3Q23, LBO is US$15b and sponsored add-on is US$7b.
In 4Q23, LBO is US$2b and sponsored add-on is US$8b.
In 1Q24, LBO is US$17b and sponsored add-on is US$7b.
In 2Q24, LBO is US$13b and sponsored add-on is US$8b.
In 3Q24, LBO is US$22b and sponsored add-on is US$7b.
In 4Q24, LBO is US$8b and sponsored add-on is US$14b.
In 1Q25, LBO is US$25b and sponsored add-on is US$14b.

Technology dominated deal volume in 1Q25 and, as per Forrester’s article, is expected to remain strong the rest of 2025 with US tech spending to grow by over 6% to reach US$3t in 2025, buoyed by the sector’s resilient nature.

Percentage of deal volume by sector (US$ 100m and above) in 1Q25 vs. 4Q24

For the technology sector, 31% in 1Q25 vs. 34% in 4Q24
For the health care sector, 14% in 1Q25 vs. 8% in 4Q24
For the utilities sector, 14% in 1Q25 vs. 8% in 4Q24
For the industrials sector, 11% in 1Q25 vs. 6% in 4Q24
For the consumer sector, 8% in 1Q25 vs. 16% in 4Q24
For the oil and gas sector, 6% in 1Q25 vs. 2% in 4Q24
For the real estate sector, 6% in 1Q25 vs. 4% in 4Q24
For other sectors, including retail, oil and gas, telecom, and real estate, 10% in 1Q25 vs. 22% in 4Q24

Aerospace and defense, along with US-based manufacturing, could attract significant amounts of capital as GPs focus on areas prioritized by the current administration.

For the US-based manufacturing sector: Significant negative – 13%, Moderate negative – 27%, No impact – 10%, Moderate positive impact – 47%, and Significant positive impact – 3%
For the non-US manufacturing sector: Significant negative – 13%, Moderate negative – 70%, No impact – 10%, Moderate positive impact – 7% and Significant positive impact – 0%
For the health care sector: Significant negative – 0%, Moderate negative – 27%, No impact – 67%, Moderate positive impact – 7%; and Significant positive impact – 0%
For the technology sector: Significant negative – 0%, Moderate negative – 50%, No impact – 43%, Moderate positive impact – 7%; and Significant positive impact – 0%
For the aerospace and defense sector: Significant negative – 0%, Moderate negative – 23%, No impact – 17%, Moderate positive impact – 50%; and Significant positive impact – 10%
For the industrials sector: Significant negative – 3%, Moderate negative – 53%, No impact – 20%, Moderate positive impact – 17%; and Significant positive impact – 7%
For the consumer sector: Significant negative – 7%, Moderate negative – 73%, No impact – 17%, Moderate positive impact – 3%; and Significant positive impact – 0%

Exit value increased in 1Q25; growth is expected on the back of available dry powder and pent-up inventory.

PE exits value from Q1 of 2021 to Q4 of 2024

In 1Q21, exit value of US$167b with exit count of 249
In 2Q21, exit value of US$206b with exit count of 320
In 3Q21, exit value of US$130b with exit count of 287
In 4Q21, exit value of US$121b with exit count of 310
In 1Q22, exit value of US$60b with exit count of 182
In 2Q22, exit value of US$207b with exit count of 174
In 3Q22, exit value of US$58b with exit count of 174
In 4Q22, exit value of US$45b with exit count of 148
In 1Q23, exit value of US$39b with exit count of 116
In 2Q23, exit value of US$47b with exit count of 111
In 3Q23, exit value of US$62b with exit count of 115
In 4Q23, exit value of US$51b with exit count of 124
In 1Q24, exit value of US$67b with exit count of 149
In 2Q24, exit value of US$48b with exit count of 135
In 3Q24, exit value of US$64b with exit count of 177
In 4Q24, exit value of US$55b with exit count of 144
In 1Q25, exit value of US$89b with exit count of 147

PE fundraising⁴ remained subdued, a trend consistently witnessed in first quarters of previous years.

PE fundraising from Q1 of 2021 to Q1 of 2025

In 1Q21, fund value raised is US$106b and fund count is 226.
In 2Q21, fund value raised is US$96b and fund count is 114.
In 3Q21, fund value raised is US$76b and fund count is 113.
In 4Q21, fund value raised is US$136b and fund count is 515.
In 1Q22, fund value raised is US$89b and fund count is 232.
In 2Q22, fund value raised is US$128b and fund count is 107.
In 3Q22, fund value raised is US$78b and fund count is 109.
In 4Q22, fund value raised is US$142b and fund count is 757.
In 1Q23, fund value raised is US$91b and fund count is 240.
In 2Q23, fund value raised is US$107b and fund count is 99.
In 3Q23, fund value raised is US$120b and fund count is 92.
In 4Q23, fund value raised is US$120b and fund count is 466.
In 1Q24, fund value raised is US$84b and fund count is 134.
In 2Q24, fund value raised is US$94b and fund count is 83.
In 3Q24, fund value raised is US$86b and fund count is 94.
In 4Q24, fund value raised is US$69b and fund count is 136.
In 1Q25, fund value raised is US$62b and fund count is 88.

Sources: Dealogic, Pitchbook, EY analysis

^*“Tariff troubles: Could protectionism revive stagflation?” EY website, 4 April 2025.
¹ Deals (deal activity) indicates US PE significant deals (i.e., deals worth US$100m and above);
² From PE Pulse Survey;
³ ”Others” includes Financials, Materials, Retail, Telecom;
⁴ Fundraising analysis is based on closed funds’ location.

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