What’s Next for Global PE in 2026? More Exits and Creative Solutions

Global private equity (PE) activity is gaining momentum as market stability returns.

After a period of volatility, investors in the US, Europe, and Asia have grown more confident operating within today’s macroeconomic and regulatory environment, while capital remains plentiful and pressure to deploy is rising.

Exit markets are beginning to show signs of improvement, as sponsors prepare a growing pipeline of sell-side opportunities following a backlog of delayed exits. Investor interest — particularly from US firms — is picking up across European markets as confidence continues to build.

Some challenges remain, including heightened regulatory scrutiny, tighter credit conditions, and a narrowing but persisting gap in price expectations between buyers and sellers. However, PE firms have largely adapted and are well positioned to navigate these constraints.

While the precise trajectory of PE markets remains uncertain, the following are five predictions shaping our outlook for 2026:

1. Dealmaking Activity to Increase as Market Conditions Stabilize

Global deal activity is expected to gain momentum as markets continue to adjust to a more stable macroeconomic and political landscape. Investors have grown more accustomed to operating within an environment defined by trade frictions and elevated interest rates.

In the US, the Federal Reserve is expected to modestly cut interest rates this year, which should improve capital accessibility and provide additional certainty for dealmakers.

Firms continue to hold significant dry powder, while limited partners are placing greater emphasis on liquidity as fundraising cycles normalize. M&A is once again a prominent growth strategy, albeit subject to more targeted selection and heavier due diligence. Buyers and sellers are increasingly using creative solutions to close pricing gaps, work through regulatory hurdles, and structure transactions that bring multiple investors together. Combined, these dynamics are expected to increase transaction volumes in 2026.

2. Exit Markets Will Reopen Gradually

Exit activity is expected to improve as market conditions stabilize, though it is unlikely to return to the outsized levels seen during the COVID-19-era boom. Signs of recovery are emerging in the UK and Europe, with more structured sales processes returning as buyer interest climbs and sponsors prepare a growing pipeline of sell-side opportunities for 2026 following a backlog of delayed exits.

Continued pressure on sponsors to generate liquidity is driving a multitude of exit and partial exit strategies, with many European firms routinely considering fund-to-fund, continuation vehicles and recapitalizations alongside traditional divestitures.

Higher levels of certainty regarding the macroeconomic picture, as well as strong public equity markets, may reopen alternative exit paths. For upper-middle-market companies in the US, initial public offerings (IPOs) and dual-track processes are becoming more credible options alongside traditional M&A, giving sponsors additional flexibility as they seek to generate liquidity.

The Hong Kong IPO market remains highly active, with investor sentiment continuing to be positive. An increasing number of PE-backed businesses will likely evaluate their exit options in addition to the sale processes that have become more prevalent in recent months.

3. US Investor Interest Will Continue Returning to Europe

International investor interest in Europe is returning after a period of retrenchment following the Russia-Ukraine war and wider economic concerns. US investors in particular are spending more time in European and UK markets, with London reemerging as a hub for both platform and portfolio company expansion across the continent.

This renewed engagement reflects growing confidence in European markets driven by attractive valuations and perceived political and regulatory stability as well as demand from European companies to partner with US PE firms that can sponsor their North American expansion.

4. Regulatory Pressures and Tax Law Changes Will Define the 2026 Playbook

In the UK and Europe, foreign investment reviews and tougher antitrust oversight are likely to extend transaction timelines and push dealmakers to be more selective in their pursuit of deals. Data governance and artificial intelligence (AI) compliance are also key concerns as investors analyze prospective businesses and bring them into their portfolios.

In the US, tax law changes under the One Big Beautiful Bill Act make permanent or extend several business-friendly provisions that were otherwise set to expire. These changes should further stabilize the market outlook for investment funds and are expected to make the use of leverage more attractive due to available deductions.

5. Healthcare, Defense, and AI Poised to Be Among the Busiest Sectors

Global deal flow is expected to remain strong across multiple corners of the market in 2026.

Healthcare is likely to be among the most active areas in Europe and Asia, driven in part by ongoing consolidation in countries, such as Germany, with high fragmentation of service provision.

In the US and Europe, investment activity in aerospace and defense is set to persist, in part reflecting growth among the software providers and service companies that support government and defense-related operations.

AI is also positioned to drive significant investment activity across the globe.

AI investment is expanding beyond core technology companies to encompass the broader ecosystem that supports AI adoption. Increased capital is being directed toward enabling infrastructure, such as data centers, as well as construction and engineering services.

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice or other professional advice by Goodwin or its lawyers. Prior results do not guarantee similar outcomes.