Dealmaking Is Back. What Does That Mean for Investors?

The first half of 2025 didn’t deliver the steady return to dealmaking many had hoped for, as delayed interest rate cuts and new tariffs stalled momentum. As the year drew to a close, however, market sentiment shifted. Less talk of “uncertainty,” more signs of movement. ^1^

Through Q3 2025, private equity firms logged roughly 1,300 exits, with total deal value reaching $621.7 billion. That’s up 64 percent from 2024’s full-year total of $379.6 billion. Deal activity in Q3 reached its fastest quarterly pace since 2021. And investment banks like Goldman Sachs and Morgan Stanley are beating Wall Street profit expectations, as a renewed wave of mergers and acquisitions pushes the industry toward its second-best year on record.^2,3^

It took longer than expected, but as the year rounds to a close, dealmaking appears to have finally found its footing again. 

Why 2023–2024 Tested Investors’ Patience

In 2023, global M&A fell 15 percent year over year, hitting its lowest level in a decade. Activity picked up in 2024, but the market saw even fewer megadeals than the year before — a sign that confidence remained thin.^4^

For many private market investors, this made for a tough stretch. When deal activity slows, it’s harder for funds to put capital to work, oftentimes leaving investor money sitting idle longer than planned. A slower market also generally weakens exits, making it harder for funds to return capital to investors.

When 2024 ended with three consecutive rate cuts, many expected relief in the new year. Financial sponsors were sitting on dry powder, and macro conditions had improved. But after the “Liberation Day” tariff announcements, deal activity dropped 66 percent. By late spring, 2025 wasn’t delivering the rebound investors had hoped for.^5^

Things began to change in May, when the President announced a pause on many of the most stringent tariffs. The market responded quickly. Deal volume and value rebounded, and the shock proved less severe than many had feared. Heading into the second half of the year, activity appeared to be finally ready to accelerate, and 2025 became the strongest dealmaking year since the low-interest-rate environment of 2021.^6^

Deal Activity Rebounds Across Every Sector

The 2025 rebound was broad-based across industries and geographies. Deal volume grew by double digits across every major sector and region. ^7^

Tech M&A is up more than 75 percent, as strategic acquirers and financial sponsors pursue AI-driven growth. Manufacturing and services also posted strong gains, alongside healthcare and energy. Most important for private market investors, dealmaking growth was nearly evenly split among financial sponsors, venture capital, and strategic acquirers.^7^

Entering the new year, many financial leaders expect 2026 to build on 2025’s deal resurgence.

“The overall outlook and expectation for the equity underwriting calendar remains very positive, and we should continue to see good levels of activity in 2026,” said Denis Coleman, Goldman Sachs’ chief financial officer, at the firm’s end-of-year global conference.^8^

Why Deal Activity Matters for Investors

Now, why does a more active transaction environment matter to investors in the first place?

For investors in existing vintages, the answer is straightforward. When dealmaking picks up, funds should have an easier time finding buyers, exiting positions, and returning capital. ^9^ But an active market also matters for investors looking ahead. This brings us back to a theme raised earlier: the ability to put capital to work.

Generally speaking, when deal activity slows, a meaningful share of investor capital sits idle instead of being deployed into projects and businesses. That idle capital weighs on overall outcomes — not because investments necessarily underperform, but because fewer dollars ever get deployed to potentially generate gains. Funds that invest earlier and more consistently put more of investors’ capital to work over the life of the fund.^10^

Put simply, whether you’re an existing investor, a new investor, or both, an active dealmaking environment keeps the gears turning in private markets.

What to Watch in 2026

An uneven 2025 tested investors’ expectations, and despite strong year-end momentum, there’s no guarantee that 2026 will be a banner year for dealmaking. But as market data and sentiment from financial leaders point in the same direction, there’s reason to believe the doldrums of 2023 and 2024 may be behind us. 

For private market investors, active dealmaking is an important signal, but not an all-encompassing one. It’s a bellwether for funds’ ability to deploy and return capital, not a guarantee of how that capital will perform. As they look to the year ahead, investors still need to weigh a range of factors, from macroeconomic conditions to execution risk, when evaluating new investments.