Private Equity: How the Big Players Are Adapting to the New Dynamics of the M&A Market

PwC has presented its mid-year update on M&A trends in private equity. Large international funds are taking advantage of the volatility of the US market to strengthen their presence in Europe and Asia, with the aim of diversifying risk and seizing opportunities linked to lower valuations and favorable public policies, particularly in the infrastructure and defense sectors. Blackstone, for example, has announced a plan to invest 500 billion dollars in the European continent over the next decade.

In parallel, AI is revolutionizing the way operations are built and run . Some funds are developing replicable blueprints for AI adoption in portfolio companies, with applications ranging from call centers to document management to simulating virtual investment committees. Brookfield has already implemented AI solutions in two of its portfolio companies, achieving significant improvements in efficiency and client satisfaction.

The data confirms the resilience of the sector : in the first quarter of 2025, buyouts grew to 4,828 operations (against 4,462 in the same period of 2024), with a total value of 495 billion dollars. Exits also increased, reaching 302 billion dollars (+82% on an annual basis), thanks also to the growing use of instruments such as continuation funds and secondary transactions.

However, the raising of new capital remains selective . Investors favor managers with consolidated track records, while the number of portfolio companies continues to grow, exceeding 30,500 by March 2025.

Another rapidly expanding trend is private credit , which is evolving from a simple direct loan to a structured financial instrument. Recent operations such as Carlyle's $1.3 billion investment in Trucordia or KKR's $600 million for the Indian group Manipal testify to the growing sophistication of the sector. Hybrid funds are also emerging, such as the $4 billion one launched by Warburg Pincus, which combine debt, preferred equity and asset-based finance.

No less relevant is the opening of private equity to the retail world . In the United States, funds such as KKR, Apollo and Empower are experimenting with the integration of alternative assets into pension plans, supported by an evolving regulatory environment.

Finally, sector convergence represents a strategic lever for value creation . PE and sovereign funds are financing projects that combine technology, energy and infrastructure to meet the growing demand for data centers and AI solutions. Initiatives such as the HUMAIN project in Saudi Arabia or the AI ​​campus in Paris are emblematic examples.

The 2025 forecast, with record levels of “dry powder” and increasing pressure to transform, private equity remains a protagonist of the global dealmaking recovery. The ability to adapt, innovate and anticipate trends will be key to driving the next phase of growth.

Private equity (PE) continues to be a driver of M&A activity, but it must adapt to an environment characterized by more expensive capital, difficult exits and a revolution driven by artificial intelligence (AI).

Francesco Giordano, Private Equity Leader at PwC Italy , explains: “Despite market and policy uncertainty, interest in deals remains high, with more selective investors. Large PE funds are taking advantage of US uncertainty to expand abroad, especially in Europe, strengthening their operations and those of their portfolio companies against geopolitical and supply chain risks. Sovereign funds have also stepped up their activity, in particular by financing energy infrastructure linked to AI”.

“AI is increasingly being used to improve operational efficiency and investment processes, with some funds creating “blueprints” that can be replicated in portfolio companies,” Giordano continues. “The global adoption of AI is changing the way M&A is done, with tools for analysis and scenario simulations. In the first months of 2025, there is a difficulty in exits that are also increasing thanks to tools such as secondary funds and continuation funds. Raising new capital remains difficult, concentrated on the best and/or largest managers.”

The US market remains cautious due to regulatory and political uncertainties , while abroad, particularly in Japan and Europe, activity appears more lively, thanks to lower valuations and government investment in infrastructure and defense.

Private credit continues to grow rapidly, evolving from simple direct lending to more complex and structured instruments, offering greater flexibility to both lenders and borrowers, with funds dedicated to hybrid debt and equity strategies.

Key trends include:

• Sector convergence driven by PE and sovereign funds, which finance projects such as AI data centers or energy infrastructure.
• New initiatives to engage retail investors, such as through 401(k) funds in the US, supported by potential regulatory changes.
• Growing regulatory scrutiny on private credit due to its rapid expansion and untested risks in crisis conditions.

Francesco Giordano, Private Equity Leader of PwC Italy concludes: “Despite market uncertainty, PE and leading investors remain active and ready to lead the recovery of M&A, taking advantage of the availability of capital and the ongoing technological transformation”.