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 indicators pointing towards a robust finish to the year, according to a recent PitchBook report. Despite ongoing challenges in exits and fundraising, the sector is benefiting from increased deal activity and a more favorable economic environment.

Deal Activity Surges Amid Improved Market Conditions

Private equity deal activity has seen a significant uptick, particularly in the B2B and technology sectors. The third quarter of 2025 witnessed 2,347 announced and closed deals, marking a 3.7% increase from the previous quarter and an 11.7% rise compared to the same period in 2024. More impressively, 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. The resolution of this uncertainty, coupled with lower interest rates and a "risk-on" sentiment in public markets, has created a more optimistic backdrop for PE activities.

Exit Challenges and Fundraising Headwinds

Despite the positive trends in deal activity, the PE sector continues to face challenges in exits and fundraising. Exit value has declined for the third consecutive quarter, showing a nearly 40% drop from Q1 levels. However, mega-sized exits have helped push the full-year exit value above 2024 figures. Exit counts have shown signs of improvement, increasing by 22.4% from the previous quarter—the first such increase since 2021.

The fundraising environment remains muted, primarily due to slowed exits and reduced distributions to limited partners. While fund count is up, capital raised declined in the third quarter. PitchBook analysts suggest that these fundraising challenges may persist into 2026 unless there is "a sharp revival in exit flows."

Market Outlook and Potential Risks

As the PE market positions itself for a strong year-end, several factors contribute to the cautiously optimistic outlook. Recession risk projections for 2025 remain below 10%, and the IPO market showed signs of recovery in Q3, although the recent government shutdown has temporarily stalled approvals.

However, inflation remains a concern that could introduce volatility, particularly when considering the uncertain impact of tariffs. The current pricing in public markets reflects a "Goldilocks" scenario, with growth strong enough to support earnings upside but not so robust as to drive interest rates higher.

In this environment, 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 watches closely to see if the current momentum will indeed result in the anticipated "high note" finish for U.S. private equity in 2025.