Private equity firms are sitting on roughly $1 trillion in unsold assets, according to PwC, as high U.S. interest rates, volatile trade policies, and geopolitical uncertainty continue to depress valuations and delay exits. Under normal market conditions, this capital would have already been returned to investors.
The resulting slowdown has strained relationships with limited partners (LPs), who are growing impatient amid stalled dealmaking. Despite optimism at the start of 2025, global M&A activity has stayed flat, with 4,535 deals totaling $567 billion through May.
PwC’s May 2025 Pulse Survey revealed that 30% of executives have paused or revisited deals due to tariff concerns. Meanwhile, nearly a third of the $3 trillion PE firms currently manage has been held for over five years—well past the typical holding period.
With traditional strategies under pressure, firms are turning to creative solutions, such as selling off parts of companies with stronger standalone value. Cross-border deals have also declined, especially those involving China, as regulatory and strategic hurdles rise.
In an environment where many turnaround investments have failed to deliver, private equity firms must rethink how to generate returns from assets often bought at market highs.
The IPO market is showing signs of revival, with 31 traditional IPOs raising $11 billion by May. After a brief slowdown in April due to tariff uncertainties, activity resumed in May and June—highlighted by Chime’s $18.4 billion Nasdaq debut. SPACs are also re-emerging, with over 50 new vehicles launched so far this year.
To unlock the $1 trillion in private equity overhang, PwC’s Josh Smigel says the U.S. must overcome recession fears, clarify trade policies, and see a drop in interest rates. Still, PwC forecasts M&A activity to improve later in 2025 or into 2026, driven by repricing and mounting pressure from limited partners seeking returns.
Source: Reuters
