Private Equity Market Update: Q2-2025
Market volatility through the second quarter of 2025 continues to impact investor confidence. However, the secondaries market is seeing growing momentum. Private equity has historically generated attractive returns through market cycles.
The second quarter of 2025 was marked by heightened market turbulence following the U.S. tariff announcements on April 2. The initial shock of trade policy tensions triggered a historic market sell-off, with the S&P 500 falling 10% and over $6.6 trillion in market value erased in just two days. Markets rebounded in early May following the announcement of a 90-day tariff implementation pause.
Despite the turbulence, M&A deal flow accelerated during the first half of 2025 with total volume increasing by 44% year-over-year. In particular, the lower end of the market, represented by deal sizes between $1 billion and $5 billion, saw a 37% year-over-year increase in global strategic M&A volumes, signaling renewed confidence (see Figure 1).
Figure 1: Global M&A Deal Activity2
With this broader context, we observed a few trends in the private equity market during the second quarter of 2025:
Global private equity deal activity remained subdued this quarter, reflecting greater caution in the current market environment.
The slowdown in private equity deal activity during Q2 2025 was evident in both deal count and total deal value, with activity down 14%, and aggregate deal value declining 27% from Q1 levels (see Figure 2). While this quarterly pullback reflects a cautious and more selective approach to new investments, the first half of 2025 still outpaced H1 2024 with total deal value rising by 9%.
Figure 2: Global Private Equity Deal Activity3
This combination of near-term moderation and year-over-year growth points to a market where private equity investors appear to be concentrating on high-conviction opportunities and portfolio value creation, where they can drive operational improvements and strategic add-ons ahead of anticipated exit windows in 2026 and 2027. In the U.S., add-ons represent 76% of total deals for Q2 2025, showing that sponsors are likely focused on their existing platforms to build scale and synergy for higher exit multiples.
The first half of 2025 saw record-breaking secondary market volumes of $102 billion, demonstrating the growing depth and maturity of the secondary market.
Secondaries deal volumes reached a record $102 billion in the first half of 2025, a 42% year-over-year increase and the highest half-year figure on record.5 Robust secondaries deal flow was driven by increased GP-led transactions and continuation vehicles, particularly in the mid-market, as well as proactive strategic portfolio management by institutional investors in LP-led secondaries. The market was nearly evenly split between LP-led transactions ($54 billion, representing 53%) and GP-led deals ($48 billion, representing 47%)5, reflecting growing momentum in both segments of the secondary market. This growth points to the increasing importance of private equity secondaries as a tool for liquidity, portfolio rebalancing, and strategic fund management.
As momentum has historically accelerated in the second half of the year, the market has the potential to exceed $200 billion for the full year for the first time – underscoring the growth depth and maturity of the secondary market.6
LP-Led vs. GP-Led Secondary Transactions
Pricing for LP-led secondaries held steady despite macro headwinds. This trend likely reflects both a flight to quality, as well as the increasing use of mosaic deal structures.
As secondary investor appetite concentrated on high-conviction assets, LP-led transactions in the first half of 2025 priced at an average 13.3% discount – broadly in line with 2024 levels and narrower than the 13.8% average seen in the first half of last year.
Buyout funds continue to dominate LP-led secondaries, both in volume and pricing strength, reflecting a clear flight to quality likely due to market uncertainty. Buyout strategies accounted for 72% of total deal value (see Figure 3), pricing at an average discount of 11.6%, modestly tighter than the broader LP-led market, with high-quality buyout funds trading at single-digit discounts. On the other hand, mid-market buyout strategies traded at a greater average discount of 13.5% likely due to the inefficiency in this segment of the market.6
Mosaic deal structures, in which a sale is split among multiple buyers, are becoming increasingly prevalent in the LP-led secondary market. They allow institutional investors to generate liquidity while enabling secondary buyers to selectively carve out specific exposures (e.g., vintage year, geography, select GPs).
These structures are also contributing to the expanding number of investors tapping into the secondary market, such as endowments and foundations. By enabling more targeted transactions, mosaic structures enhance the value of active portfolio management opportunities that participants can realize in the secondary market.
LP-Led Secondary Market Split by Fund Strategy5
Global private equity fundraising posted its most muted first half since the onset of the COVID-19 pandemic. In contrast, secondaries-focused funds have sustained momentum and continued to attract capital.
Global private equity fundraising totaled $384 billion in the first half of the year, down 17% from the same period last year. The slowdown reflects a combination of extended fundraising cycles, cautious pacing of new commitments, and a crowded fundraising calendar. Despite this, limited partners maintain conviction in private markets.
Against the broader global fundraising slowdown, secondaries attracted a growing share of fundraising dollars as investors appear to see the benefit from the liquidity, diversification, and return profile of secondaries funds. With continued conviction in the strength and scale of the secondary market opportunity, private equity secondary fundraising is on track to exceed last year’s levels.
Despite the market turbulence through Q2, private equity investors remain focused on high-conviction opportunities and driving portfolio value creation. The secondaries market continues to deepen and mature, offering an increasingly attractive market for secondaries investing.
Endnotes:
- With respect to any trends highlighted in the charts associated with this mailer, please note there can be no assurance that such trends will continue in the future. Public Market Volatility Source: Market Watch, July 2025.
- Global M&A Deal Activity Source: Global M&A: A Bold Path for Strategic Growth, Goldman Sachs, 2H 2025 Outlook.
- Global Private Equity Deal Activity Source: Pitchbook Global Private Equity Deal Activity, January 2025.
- PE Add-on Source: Juniper Square, The State of Private Equity, July 2025.
- Total Secondary Market Volume Source: Evercore, H1 2025 Secondary Market Review, July 2025.
- Secondary Market Growth and LP-led Pricing Source: Campbell Lutyens, Secondary Market Overview Report, August 2025.
- Global Private Equity Fundraising Source: Private Equity International, Fundraising Report H1 2025, July 2025.
- Secondaries Fundraising Source: S&P Global, Private Equity Secondaries Fundraising, June 2025.
Important Notices:
This document is for informational purposes only and does not constitute a general solicitation, offer or invitation in any Northleaf-managed product in the United States or in any other jurisdiction and has not been prepared in connection with any such offer. The views and opinions expressed herein do not constitute investment or any other advice, are subject to change, and may not be validated by actual events. There can be no assurance that any of the trends highlighted above will continue in the future, Certain of the information set forth herein was gathered from various third-party sources which Northleaf believes to be accurate but has not been able to independently verify.
Related News
