The outlook for the buyout industry looks a lot healthier than you might think.
Despite the negative commentary around deal volume, exits and fundraising, we see good reasons to be positive.
- A lot of buyout-owned portfolio companies are performing well. Really well, in fact. There are a lot of high-quality companies delivering revenue growth, expanding global footprints, expanding margins and improving profitability. As exits pick up, these companies will be at the forefront of crystallising strong returns.
- Buyout managers are raising new funds because the opportunity demands it. They see broad opportunities for attractive deployment while LP allocations to private equity remain large. Undoubtedly LPs are becoming more discerning, but the leading players have strong expertise and platforms which should benefit from this.
- Financing and liquidity conditions have improved significantly. The maturity of the secondaries industry has created a large, mainstream exit path. Meanwhile, short-term rates have fallen and direct lenders continue to have demand to finance buyout transactions.
- The buyout industry is now firmly established as a critical source of equity capital for mid-sized businesses, especially in Europe. Small and mid-cap segments of the listed market are still shrinking and often suffering from persistently depressed valuations. Listed equities no longer offer investors the same kind of access to the economic growth engine of mid-sized companies.
Reality looks a lot better than the headlines suggest. 2026 could well be the year of positive surprises in the buyout industry.
