How Private Equity’s Slow Burn Will Shape The Next M&A Cycle

Private equity has spent recent years waiting for an exit wave that has not arrived in full. In an article published under the Forbes byline, Marc Cooper, Chairman and Chief Executive Officer of Solomon Partners, argues that the industry is instead undergoing a slower, more selective reset driven by the gradual repricing of thousands of aging investments held by PE funds. He describes the recovery as divided by price rather than by access to capital. Financing markets are robust and large strategic deals are closing, yet buyers and sellers still disagree on what assets acquired in a very different rate environment are worth.

The headline figures are encouraging. According to the article, U.S. private equity exit value reached nearly $645 billion in 2025, more than double the 2023 trough. However, the rebound is uneven. Exit value has recovered much faster than exit volume, and especially in the middle market, much of the activity is concentrated in a relatively small number of larger transactions. As of June 30, more than 13,500 U.S. companies were owned by PE firms, nearly half held more than five years and more than a quarter held at least seven. Cooper notes that most of these businesses are not distressed and many have solid earnings, but they were acquired when interest rates were near historic lows and buyers could underwrite aggressive growth and exit assumptions.

The core issue is a valuation gap. Sponsors may believe another year or two of earnings growth can support their carrying values, while buyers are underwriting returns at current financing costs and more conservative exit assumptions. When those views diverge, transactions stall. Alternatives are expanding: strong companies will still sell to strategic buyers, and sponsor-to-sponsor transactions have accounted for roughly 45% of PE exits over the past decade. Continuation vehicles, secondaries, partial sales, recapitalizations and bilateral deals extend timelines and create optionality, but Cooper argues they do not eliminate the need for buyers and sellers to agree on price.

Investor priorities are also shifting. Attention has moved from paper gains to cash distributions, which have remained at or below 15% of net asset value for four consecutive years. Distributed-to-paid-in capital has become central to fundraising discussions and is changing how funds operate and raise capital. Capital is concentrating among larger, better-established managers, while firms with fewer exits face greater difficulty raising new funds, and the number of U.S. funds raised annually has fallen sharply from its 2022 peak. Cooper stresses that this does not mean the middle-market PE model is broken, but that it is being tested in ways it was not during the era of cheap debt and expanding multiples.

Cooper expects the backlog to be worked down gradually through individual decisions, such as sponsors accepting realistic prices or aging assets moving into continuation vehicles on terms a new owner can justify. He concludes that with cheap leverage and multiple expansion no longer driving returns, managers must improve operations and build stronger companies to sell at prices the market will pay. He characterizes this as a tougher model of private equity that may also prove to be a better one.