Private Equity's New Playbook: Unlocking Value in a Thawing Market

NEW YORK, NY – December 02, 2025 – A renewed, albeit cautious, confidence is rippling through the global private equity landscape. After a period of sluggish dealmaking and fundraising gridlock, general partners (GPs) are signaling a market in the midst of a gradual thaw. According to the eighth annual Global Private Equity Outlook from law firm Dechert, produced with Mergermarket, strong year-over-year gains in buyout and exit values are fueling optimism. However, this is not a return to the frothy markets of the past. Instead, it marks the ascent of a more sophisticated, adaptable industry deploying an innovative toolkit to unlock liquidity and navigate a complex web of geopolitical and regulatory risks.

Faced with persistent valuation gaps and pressure from investors to return capital, GPs are no longer just waiting for the IPO window to reopen. They are proactively engineering liquidity, with an overwhelming majority turning their focus toward high-growth, defensive sectors like life sciences and technology.

The New Liquidity Toolkit

The most significant shift highlighted in the Dechert report is the aggressive adoption of creative financial structures to generate distributions and fund new opportunities. The traditional exit path of a strategic sale or IPO, while still the goal, has been supplemented by a powerful set of alternatives. Chief among these are GP-led secondaries and continuation vehicles. An astonishing 46% of surveyed executives report using these tools, nearly double the figure from last year’s survey. This surge underscores their critical role in the current environment. Continuation funds allow GPs to sell a prized asset from an older fund to a new vehicle they also manage, providing liquidity to existing limited partners (LPs) while enabling the firm to continue nurturing the asset’s growth. This solves a dual problem: it satisfies LPs’ need for distributions (DPI), a key metric for fundraising success, and prevents the forced sale of a high-performing company into a suboptimal market.

Parallel to this trend is the expanding dominance of private credit. With traditional banks retreating from riskier lending, private credit has stepped in to become the financial backbone of the PE ecosystem. The report finds that 57% of GPs are now using private credit for refinancing and recapitalizations at the portfolio level, its most common application. This access to flexible, bespoke debt allows firms to optimize balance sheets, fund bolt-on acquisitions, and extract dividends, all without relying on volatile public debt markets. Furthermore, 36% of respondents expect the use of fund finance to increase, a dramatic jump from just 2% a year ago, signaling that GPs are leveraging credit at every level of the capital structure to enhance returns and operational flexibility.

Bridging the Valuation Divide

Despite the market’s recovery, a stubborn gap often remains between buyer and seller price expectations. The era of cheap debt that once papered over these differences is gone. In its place, dealmakers are relying on structured solutions to get transactions over the finish line. The Dechert report reveals that nearly half (48%) of all GPs now favor earnouts to bridge valuation disagreements. This figure is even more pronounced in the Asia-Pacific region, where 60% of respondents use them.

Earnouts, which make a portion of the purchase price contingent on the acquired company meeting future performance targets, effectively allow both parties to share risk and reward. For sellers, it offers a path to achieving their desired valuation if their growth projections prove accurate. For buyers, it provides a crucial buffer against overpaying in an uncertain economic climate. This widespread use of earnouts reflects a more disciplined and pragmatic approach to dealmaking, where conviction must be backed by tangible results.

Big Bets on Healthcare and Technology

When it comes to deploying this hard-won capital, PE firms are showing remarkable consensus. A full 75% of survey participants expect to invest in life sciences and healthcare over the next 24 months, with technology following closely at 74%. This dual focus is not accidental; it is a strategic bet on sectors driven by long-term, non-cyclical trends such as aging populations, medical innovation, and digital transformation.

For the healthcare sector, this influx of capital promises to accelerate advancements in biotechnology, pharmaceuticals, and medical devices. Investors are drawn to the industry's defensive qualities and its potential for significant breakthroughs in areas like cell and gene therapy, AI-driven drug discovery, and personalized medicine. However, this intense interest also brings heightened regulatory scrutiny, particularly in the United States, where antitrust agencies have taken a keen interest in PE-backed roll-up strategies in physician practices and other healthcare services, citing concerns over market consolidation and rising costs.

Navigating a Minefield of Global Risks

The optimism within the PE industry is tempered by a clear-eyed view of external threats. Nearly half (49%) of all respondents cited geopolitical conflicts as a primary factor influencing the deal environment. This concern is most acute in the EMEA region, where 65% of executives see it as a main challenge. These conflicts disrupt supply chains, create macroeconomic instability, and demand a higher risk premium for cross-border transactions.

Compounding this is a growing unease around the regulatory landscape. The report notes that 47% of survey participants anticipate a negative impact from the "politicization" of merger control enforcement. Antitrust authorities in the U.S. and Europe have adopted a more interventionist stance, prolonging review timelines, demanding more significant remedies, and in some cases, blocking deals entirely. This requires PE firms to engage seasoned legal and regulatory advisors earlier than ever to navigate complex approvals and safeguard transactions.

"Momentum is building as sponsors unlock liquidity and redeploy capital through innovative structures," noted Dr. Markus P. Bolsinger, co-head of Dechert's global private equity practice. "At the same time, geopolitics and the politicization of merger control demand seasoned counsel across jurisdictions. Engaging experienced advisors early is critical to advancing complex transactions and safeguarding outcomes in such a dynamic regulatory environment."

As the industry pushes into 2026, it is clear that the playbook has been rewritten. Success is no longer just about buying low and selling high; it is about strategic adaptation, disciplined sector selection, and the masterful use of a sophisticated financial toolkit. This evolution signals a resilient industry that is learning to thrive not in spite of uncertainty, but by strategically navigating it.