DealLawyers.com Blog

Investment consulting firm Verus Investments recently published its 2025 Private Equity Outlook, which provides an overview of year-over-year trends in Private Equity, Venture Capital, and Private Credit activity.  Here are some of the report’s key findings:

Deal activity increasing. Deal activity in Private Equity and Venture Capital has accelerated, driven by narrowing bid-ask spreads, rising public valuations, cheaper debt financing, and strong demand for select sectors and high-quality assets. 2025 activity may surpass all non-2021 years over the past decade, propelled by both opportunity and necessity as record levels of dry powder pressure managers to deploy and liquidity needs push sponsors and companies to transact.

Exit activity showing signs of potential recovery. Exit volumes are now on track to exceed all non-2021 years within the past decade for best-in-class assets and select sectors. Recent IPOs are broadly seeing market capitalization expansion, while Continuation Vehicles and strategic acquisitions (particularly in Artificial Intelligence and tech adjacencies) increase. Excluding continuation vehicles, sponsor to sponsor transactions are in line with 2023 – 2024 activity levels. Persistent macroeconomic conditions may accelerate exits.

Cost of debt decreasing. The declining cost of debt may be conducive to investment and exit activity. Should acquisition financing further cheapen through persisting spread compression and lowering base rates, an equity tailwind and credit headwind may occur. Equity segments that are more leverage dependent, such as large-caps, may be disproportionately supported relative to others. Less trafficked lending segments may warrant additional consideration as yields across corporate credits decline.

On the other hand, the report says that the fundraising environment remains challenging, with fundraising on pace for its lowest levels since 2017. The report attributes this to “muted distribution activity” and takes a deep dive into the current distribution environment.

– John Jenkins