Beyond the Headlines: The Enduring Value of Private Markets

Private markets are demonstrating greater operational discipline and selective capital deployment rather than deterioration, according to analysis from Carlyle's Partners Ruulke Bagijn and Hannah Khizgilov. The distinction between public and private market dynamics has sharpened considerably. While public equity markets have become increasingly subject to passive capital flows and retail investor sentiment reacting to short-term headlines, private market pricing remains grounded in underwritten return expectations evaluated across multiyear holding periods. This fundamental difference in valuation methodology has translated into more selective underwriting standards and a more balanced assessment of risk-return tradeoffs in private markets.

The operational case for private markets appears empirically robust. Carlyle's proprietary data covering 1,600 portfolio firms reveals that sponsor-backed companies in the US achieved median revenue growth of 6.2% and profit growth of 7.7% over year-ago levels. This performance substantially outpaced publicly traded peers: companies in the S&P Small Cap index recorded revenue growth of 4.7% and profit growth of just 0.7% during the same period. This performance differential suggests that private market operational improvements and management discipline are delivering measurable value creation.

Deal activity accelerated significantly in Q3 2025, with global M&A reaching $1.3 trillion—representing a 21% increase from Q2 and a 42% year-over-year surge. This momentum was driven by several landmark transactions, including Union Pacific's announced $88.2 billion acquisition of Norfolk Southern and Palo Alto Networks' $24.5 billion purchase of CyberArk. Private equity leveraged buyouts similarly rebounded to $241 billion in Q3, marking the highest quarterly volume since 2007, with six of the ten largest transactions occurring in US markets. This resurgence in LBO activity reflects renewed sponsor confidence and the availability of capital despite elevated interest rate environments, which have raised required earnings growth thresholds for return target achievement.

However, exit activity remains a constraint on capital recycling. Global buyout exits totaled $101 billion in Q3, essentially flat compared to Q2 but down 7% year-over-year. This disconnect between entry-stage deal activity and exit opportunities reflects ongoing liquidity challenges in public markets and secondary markets, forcing investors to extend holding periods and manage portfolio duration risk more carefully. The combination of robust operating performance, disciplined underwriting, and elevated deal activity offset by constrained exit opportunities presents a complex environment requiring sophisticated capital management and portfolio monitoring.