According to PwC’s midyear 2025 report, private equity (PE) firms are holding an estimated $1 trillion in unrealized assets, capital that—under normal market conditions—would have already been returned to limited partners (LPs). But high interest rates, persistent tariff uncertainty, and geopolitical volatility have delayed exits and stalled global M&A activity.
“In a typical M&A cycle, $1 trillion would already have been put back into the market,”
said Josh Smigel, U.S. Private Equity Leader at PwC.
Key Data Points from the Report:
M&A activity flat in 2025: 4,535 deals worth $567B through May, nearly unchanged year-over-year.
30% of PE-owned companies held over 5 years, far exceeding traditional exit timelines.
57% of PE-backed turnaround investments have either stagnated or lost value.
Cross-border deals declined to 16.9% of total volume (vs. 18.7% in 2021), with China-related deals facing more scrutiny.
Amid this environment, LPs—some of the world’s largest capital allocators—are showing signs of frustration, said Kevin Desai, PwC U.S. Deals Platform Leader. Tariff policy, especially under the Trump administration’s unpredictable approach, has created additional deal uncertainty, with 30% of firms delaying or reassessing deals due to trade tensions.
Where Does PE Go from Here?
With $3 trillion currently invested in over 30,000 companies, PE firms now face mounting pressure to deliver returns. Creative value-extraction strategies—such as partial spin-offs or carve-outs—are becoming more common, especially for assets bought at peak valuations.
“Firms now need to be more creative to generate liquidity,”
said Liz Crego, PwC Industry Markets Leader.
The IPO market is showing signs of revival, with 31 traditional IPOs raising $11B through May. Fintech unicorns like Chime ($18.4B valuation) led the rebound, while SPACs are quietly returning, with over 50 formed in early 2025.
Despite near-term headwinds, PwC remains cautiously optimistic:
“We could see a reacceleration of M&A in the second half of 2025 into 2026,”
Smigel noted.
“It will depend on macro stabilization—tariffs, interest rates, and a clearer recession outlook.”
Bottom line:
The PE industry is at a crossroads. With patience thinning among LPs and capital locked in aging portfolios, firms must adapt exit strategies, reprice assets, and navigate uncertainty with greater agility. The road ahead may be bumpy—but for agile funds, it may also be opportunistic.
