After a year of bigger deals and rising exits, private equity is moving into 2026 with momentum, though Bain’s Global Private Equity Report 2026 highlights liquidity as a growing focus as investors wait for capital to be returned.
Beneath the rebound in activity, however, the report points to a structural tension shaping the market: Value creation is improving, but the recycling of capital remains slow. Investors continue to hold significant unrealized gains while waiting for distributions, a dynamic that Bain says is influencing fundraising, exit strategies and how sponsors measure performance across their portfolios.
Liquidity pressures extend ownership timelines
PE activity gained momentum in 2025 as firms adjusted to changing market conditions. Global buyout deal value climbed 44% to $904 billion in 2025, while exit value rose 47% to $717 billion, supported by large public-to-private transactions and a pickup in corporate M&A activity. Bain describes the current environment as a more mature phase for the industry, one shaped by higher interest rates, elevated asset prices and a growing emphasis on operational execution.
Even as headline activity improved, cash returns to limited partners remain challenging. Distributions as a percentage of net asset value have stayed below 15% for four consecutive years. Bain’s data signals that capital is stuck inside existing investments, with roughly 32,000 portfolio companies worth about $3.8 trillion remaining unsold globally.
The buildup of unrealized assets is reshaping how PE investment timelines work. Average holding periods at exit have reached around seven years, compared with five to six years during much of the previous decade. Notably, researchers mention that internal rates of return tend to flatten or decline as assets remain in portfolios longer, underscoring the growing importance of operational execution on the CFO’s part throughout extended ownership cycles.
The longer hold cycle reflects a market where firms are relying more on operating performance to drive returns. Bain said sponsors are placing greater emphasis on improving company performance, managing capital allocation and aligning strategy with financial results.
This slower pace of exits is also influencing investor behavior. LPs, according to Bain, often rely on distributions from existing investments to fund new commitments, and the prolonged ownership cycle is shaping fundraising dynamics across the industry. Bain notes that even as overall deal activity shows signs of recovery, liquidity constraints remain one of the defining themes this year.
EBITDA’s evolving role in value creation
Researchers also highlight faster EBITDA growth as a central component of value creation in today’s market, summarizing the shift with the phrase “12 is the new 5.” The phrase reflects a growing focus on operating performance and earnings growth as firms navigate a higher-rate environment, rising hold cycles and inflationary market conditions.
EBITDA has long been debated among investors, with Warren Buffett and the late Charlie Munger famously questioning how well the metric reflects underlying cash generation, as it excludes depreciation, capital intensity, ongoing capital spending needs and financing costs. In Bain’s report, however, EBITDA is framed as a measure of operating performance, tied to faster earnings growth expectations and execution during longer ownership cycles as firms pursue value creation.
The focus on operating performance comes as Bain reports deal activity becoming more concentrated. Thirteen transactions valued above $10 billion accounted for over two-thirds (69%) of growth in deal value during 2025, while overall deal count declined 6% year over year. Bain said sovereign wealth funds and strategic corporate investors played an important role in these megadeals, contributing capital alongside traditional sponsors.
Bain also notes that firms are investing more heavily in technology, talent and data infrastructure to support execution and differentiate their strategies. The shift aligns with broader CFO trends showing larger organizations advancing technology adoption more quickly than smaller counterparts.
Exit pathways and fundraising dynamics
Exit activity in 2025 included more deals involving corporate buyers and sponsor transactions. Strategic exits grew two-thirds (66%) globally, while IPOs remained a smaller share of exit activity despite improving public equity markets. Bain said high-quality assets continued to attract the strongest buyer interest, reinforcing the importance of operational performance in shaping exit outcomes.
Alongside traditional exits, continuation vehicles and secondary transactions continued to expand, though Bain estimates they still account for less than 10% of total exit value, positioning them as a supplemental pathway rather than a primary source of that desperately sought-after liquidity.
Fundraising activity has also been shaped in part by liquidity conditions. Global alternatives fundraising held roughly flat at about $1.3 trillion in 2025, while buyout fundraising declined 16%. LPs, according to Bain, are placing greater emphasis on repeatable strategies, sector specialization and consistent distributions to paid-in capital when allocating new commitments.
The fundraising environment reflects a market where investors are increasingly focused on execution and clarity of strategy. Bain notes that firms with strong performance histories and clear value creation models are better positioned to raise capital as competition intensifies.
Bain said conditions heading into 2026 appear supportive of continued activity, citing gradually lower interest rates, active deal pipelines and steady corporate demand for acquisitions. Most GPs surveyed expect exit momentum to continue, suggesting that distributions could improve if market conditions remain stable.
Notably, the report also highlights the cyclicality of the evolving private equity model, where funds deploy capital, assets remain held for longer periods and firms pursue liquidity to satisfy LP demand for returns through exits, M&A and secondary structures as new investors enter the market. Bain frames this ongoing cycle as a defining feature of the industry’s next phase, one that continues to shape how CFOs operating under private equity plan for growth, execution and capital returns.
