DealLawyers.com Blog

A recent CLS Blue Sky blog from Mayer Brown’s Jonathan Dhanawade reviews the state of the private equity exit market. As this title suggests, the theme is that the market “has improved, but it has not reverted to the conditions many sponsors once viewed as normal.”

Several sponsor-backed issuers accessed the public markets during the first quarter of 2026, while large sponsor-to-sponsor transactions also returned for scaled, high-quality assets. While market sources and data points vary, they generally report a decline in U.S. private equity exit deal value, but an increase in U.S. private equity deal volume in the first quarter of 2026 as compared to the first quarter of 2025. There isn’t enough data yet on Q2.

Strategic acquirers continue to pursue transactions that fit defined priorities. Capital is available, but disciplined. Public market demand has returned, but selectively.

Sponsors are responding by planning further ahead:

In prior cycles, liquidity planning was often concentrated near the end of the hold period. Today, many sophisticated firms are treating liquidity as an ongoing ownership function, developed well before a formal sale process begins [. . .]

Many firms are pursuing exits only after key initiatives are complete and the business can be presented with conviction. Others are extending holds where another year of focused execution may materially improve value. Some are pursuing structured liquidity solutions that provide distributions now while preserving future upside.

Here’s what the blog says effective sponsors are doing specifically. See the blog for more details on each.

1. They Underwrite the Exit While Owning the Asset. “Some sponsors [. . .] revisit the eventual buyer universe, likely diligence focus areas, and valuation drivers throughout the hold period.”

2. They Distinguish Motion From Progress. “Sophisticated sponsors focus on changes that are likely to matter in a sale process: revenue durability, margin quality, management depth, systems credibility, market position, and scalability.”

3. They Run Multiple Paths Without Signaling Uncertainty. “The strongest firms often evaluate multiple liquidity paths simultaneously. A traditional sale, structured recapitalization, or continued hold may each remain viable until late in the process.”

4. They Manage the LP Narrative With Specificity. “Sponsors who can explain why an asset is being sold now, held longer, or monetized through an alternative structure are often in a stronger position than those offering only broad market commentary.”

– Meredith Ervine