AI comes to the fore as both a strategic priority and execution tool for private equity and principal investors
Large-scale partnerships to fund AI data centres, the supporting computing capacity, and energy infrastructure continue to expand, reflecting both the scale of investment required and the huge need for future power availability. For private equity and principal investors, these investments represent more than infrastructure exposure; they are increasingly about securing long-term participation in the AI value chain through consortiums that combine financial, technology, energy, and sovereign capital.
The scale of this opportunity is substantial. External estimates suggest that $5tn to $8tn in capital expenditures will be required by 2030 to fund AI technologies and the enabling infrastructure, including data centres, chips, networks and new energy capacity. A recent example illustrating the growing role of long-term institutional capital is the AI Infrastructure Partnership, an investor group backed by some of the largest private equity, private credit, sovereign wealth, technology providers and energy companies. In October 2025, the group announced its first major investment with the $40bn acquisition of one of the world’s biggest data centre operators. In addition, other sovereign funds have teamed up with private equity firms to invest in a range of AI-related infrastructure assets or have made other direct investments of their own.
Beyond infrastructure, AI is reshaping how private capital firms evaluate investment opportunities and position portfolio companies for long-term growth. Both generative AI (powered by large language models) and agentic AI (multiple AI agents embedded into specific workflows) are becoming integral to how private equity firms assess targets and plan value creation. Some large sponsors estimate that 30–40% of investment committee discussions now focus on whether portfolio companies can deploy AI to enhance productivity and growth or whether their business models could be disrupted by more technologically advanced competitors. Some private equity firms have launched virtual investment committee agents to review deal materials, surface sector-specific risks and opportunities, and feed recommendations into the investment decision-making process.
Fewer but larger M&A transactions define the next phase of private equity dealmaking
Globally, M&A activity over the past two years has been characterised by a decline in transaction volumes alongside a rise in aggregate deal values, a pattern that is also evident in private equity. As sponsors deploy capital more selectively, activity has skewed toward larger, higher-conviction transactions, often involving consortium arrangements, complex capital structures, and a growing share of take-private deals.
In 2025, global private equity transaction value reached almost $2tn, up from roughly $1.6tn in 2024, even as the number of deals slipped to approximately 34,300 from about 36,500 year over year. A relatively small number of megadeals accounted for a disproportionate share of deal value.
Take-private transactions have been a defining feature of this trend, as sponsors seek greater control over strategy, capital allocation, and transformation initiatives away from the scrutiny of public markets. Recent examples include the $55bn agreed acquisition of videogame developer Electronic Arts by a sovereign wealth and private equity-backed consortium—the largest leveraged buyout on record, Sycamore Partners’s $23.7bn take-private of Walgreens Boots Alliance, and Blackstone and TPG’s agreed acquisition of women’s health, medical device, and diagnostic company Hologic, valued at up to $18.3bn.
Geography continues to shape deal outcomes
While global deal volumes remain subdued, some markets have seen a resurgence in private equity activity. Japan has emerged as a standout, with sponsor-backed deal values rising sharply since 2024, supported by corporate governance reforms, pressure to improve capital efficiency and a weaker yen attracting international buyers. Global and domestic sponsors have been active in take-privates and corporate carveouts, as illustrated by EQT’s planned $2.7bn privatisation of Fujitec.
India has also continued to attract increasing private equity attention. Global sponsors are raising and deploying new Asia-focused funds. Based on PwC estimates, more than one-third of capital from newly raised Asian private equity funds is now being directed towards India, reflecting confidence in that market’s long-term growth prospects.
Secondary markets are easing exit pressure—but not eliminating it
The backlog of private equity portfolio companies continues to weigh on exit activity. By the end of 2025, the global inventory of private equity-backed companies rose to around 32,500, up from 29,400 a year ago, with a growing share held beyond targeted holding periods as IPO markets remained uneven and buyer appetites remained selective.
In this environment, secondary transactions have become an increasingly important relief valve. Sponsor-to-sponsor deals, GP-led continuation vehicles and other secondary structures are providing liquidity where traditional exit routes remain constrained, allowing managers to extend ownership of select assets while returning capital to limited partners (LPs). These structures are increasingly being used not only to manage timing risk but also to support longer value creation horizons for assets requiring sustained investment or operational transformation.
IPOs are an option again—just not for everyone
Public markets are showing early signs of reopening, with the $7.2bn IPO of Medline—the largest listing of 2025—providing a positive signal that issuance is beginning to pick up. However, IPOs continue to account for only a small share of private equity exits. As a result, secondary transactions, including sponsor-to-sponsor deals and continuation vehicles, are expected to remain the dominant exit route for private equity firms in 2026. That said, there may also be selective opportunities for sales to strategic buyers, following transactions such as GTCR’s sale of Worldpay to Global Payments and the proposed sale of Calpine to Constellation Energy by Energy Capital Partners and others.
Ultimately, the ability to generate exits through secondaries or other routes remains critical to returning capital to LPs and, in turn, supporting managers’ ability to raise new funds. The biggest GPs are continuing to raise large flagship funds, but the long tail of managers is struggling to follow suit. Some are facing capital constraints as exits have slowed and LPs demand returns.
In fundraising, size matters
Amid lacklustre distributions, global private equity fundraising remains under pressure, leading institutional investors to rein in commitments with a drop of 3.8% from $724bn in 2024 to just under $700bn in 2025—the lowest level in more than five years. However, fundraising activity among the top private equity funds has increased; last year the top ten took their largest share of US fundraising in more than a decade, because investors looking to increase their allocation of assets to private markets are backing the larger fund managers. The growth of megafunds reflects both investor demand for scale and the evolution of private markets themselves. Going forward, the largest private equity and principal investor platforms will play a central role in financing growth, managing risk, and driving consolidation across industries—making them a core part of the broader financial ecosystem.
