Private equity dealmaking was building momentum in Q1, then came tariffs

There seems to be little that has not been impacted in some way or another by Trump’s tariffs and private equity has not escaped.

A new report reveals that activity had been building momentum in 2024 and through the first quarter of 2025, but tariff turmoil and the resulting economic and market headwinds appear to have contributed to a slowing of buyout activity in April. Deal volume was down 24% from the monthly average in Q1 while deal count was 22% below the Q1 monthly average.

And the Bain & Company report also shows that exits also slowed in April as IPO channels were effectively shut down though cancelations and postponements.

With investor confidence knocked by tariff uncertainty, the short-term outlook for PE players is subdued, but the analysis suggests that longer-term opportunities exist with buyout funds sitting on $1.2 trillion of dry powder and a quarter of that having been available for at least four years.

“There’s nothing fundamentally broken in the market. Buyers and sellers can still transact – and history shows that strategic buyers with a strong M&A agenda remain active in turbulent times. In any disruption there are winners and losers – and the best opportunities often come at the most extreme moments of uncertainty, something that’s still true in 2025,” Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company, said. “It’s not a foregone conclusion that 2025 will be a bad year. If the tariff uncertainty dissipates, momentum could return more quickly than many might imagine. Winning players will be poised to grasp emerging exit opportunities. And they will also anticipate what might come to the market – and form a clear view of what they want to own.”

With a slowdown in deals, the PE industry’s liquidity issues are set to be worsened as general partners are stuck with unsold and aging portfolio companies that they cannot sell to free up returns for limited partner investors.

LP investors also want full exits rather than partial or minority exits and while some are turning to secondaries markets to release cash, the report warns that this is not a mature enough route to solving PE’s liquidity needs.

But the industry needs to win over investors to address another issue – fundraising. The report finds that for every $3 of demand for capital, there is only $1 available. And it says that private wealth’s position as a funding source has yet to prove that it can take up the slack.

“Whatever turns lie ahead, PE firms must excel at creative dealmaking, due diligence and value creation to make the most of the best opportunities that will flow out of today’s uncertainty,” Rebecca Burack, global head of Bain & Company’s Private Equity practice, said. “That doesn’t mean just pinpointing the short-term effects of tariffs on a company’s demand, competitiveness and margins. Tomorrow’s winners will be the firms that can also accurately gauge the long-term ability of portfolio companies to adjust to, and operate in, the new, post-global era. The winners in these conditions will also be those firms that operate on the front foot. When wait-and see is the default mode, it pays to be a catalyst. And with no end to the turbulence in sight, leaning into it is likely the best option.”