US Private Equity Market Shows Signs of Recovery, Positioning for Strong Year-End

The U.S. private equity (PE) market is experiencing a resurgence, with robust deal activity and favorable interest rates driving optimism across sectors. Despite ongoing challenges in exits and fundraising, the industry is poised to end the year on a high note, according to a recent PitchBook report.

Deal Activity Surges Amid Improved Market Conditions

The third quarter of 2025 has seen a significant uptick in PE deal activity, particularly in the B2B and technology sectors. A total of 2,347 announced and closed deals were recorded, marking a 3.7% increase from the previous quarter and an 11.7% rise compared to the same period in 2024. The aggregate deal value for Q3 reached $331 billion, representing a substantial 28% jump from Q2 and a 38% increase year-over-year.

This surge in dealmaking follows what PitchBook describes as an "air pocket" in the second quarter, during which general partners awaited clarity on financing conditions. With the Federal Reserve's recent interest rate cuts bolstering equities and public markets tilting towards a "risk-on posture," private buyers are now accelerating their activities to keep pace with rising public market benchmarks.

Exit Landscape: Mixed Signals and Emerging Opportunities

While PE deal activity flourishes, the exit landscape presents a more complex picture. Exit value has declined for the third consecutive quarter, showing a nearly 40% drop from Q1 levels. However, mega-sized exits have helped drive the full-year exit value above 2024 figures. Encouragingly, PE exit counts have increased by 22.4% from the previous quarter, marking the first such increase since 2021.

The IPO market, which had been sluggish, showed signs of revival in Q3. However, the government shutdown that began in October has temporarily stalled IPO approvals, adding a layer of uncertainty to the exit environment.

Fundraising Challenges and Future Outlook

The PE industry continues to face headwinds in fundraising, with capital raised down in Q3 despite an increase in fund count. PitchBook analysts suggest that this challenging fundraising environment may persist into 2026 unless there is "a sharp revival in exit flows."

Looking ahead, recession risk projections for 2025 remain below 10%, but inflation "remains a live risk that could inject volatility," particularly considering the uncertain impact of tariffs. The current market pricing reflects a "Goldilocks" scenario, with growth strong enough to support earnings upside but sufficient to restrain interest rates.

In this evolving landscape, PE firms are expected to maintain a selective approach to new investments while increasingly focusing on fostering exits. As the year draws to a close, the industry's ability to navigate these complex market dynamics will be crucial in determining whether it can indeed end on the high note that current trends suggest.