Dry Powder: The Private Equity Podcast

Bain & Company’s Global Private Equity Report 2026: Executive Summary

Host: Hugh MacArthur, Chairman of Bain & Company’s Global Private Equity practice
Date: February 23, 2026

Episode Overview

This episode features Hugh MacArthur presenting an executive summary of Bain & Company’s 2026 Global Private Equity Report. With private equity markets showing initial signs of recovery after several turbulent years, Hugh examines whether this momentum is widespread and sustainable. He explores deal and exit activity, fundraising dynamics, return trends, and asserts the industry is at a crucial inflection point—demanding new, sharper strategies for future winners.

Key Discussion Points and Insights

Signs of Recovery—But For Whom?

2025 Data Highlights:
- Over $900 billion in deal activity (second highest ever after 2021) (01:16)
- $700 billion in exits (one of the best years)
- $1.3 trillion raised for all private asset classes (equal to 2024 levels)
- Despite these large figures, actual deal count down by 6% and exit count down by 2% (03:43)
  - A handful of megadeals, including the largest ever ($57 billion take private of EA), made up the difference.
Insight:
- The top end of the market (biggest players, largest funds) are benefiting most from the recovery, while smaller firms and deals remain under pressure.
- “Very few deals actually soaked up a lot of that capital in terms of the total enterprise value that was being deployed in 2025.” – Hugh MacArthur (04:52)

Fundraising Landscape: Flat on the Surface, Tumultuous Underneath

Big Picture:
- All-alternatives fundraising flat at $1.3 trillion in 2025.
- Buyout fundraising, however, was down 16% due to ongoing liquidity constraints for institutional investors (09:22).
Sectoral Trends:
- Infrastructure: Strong inflows thanks to durable, cash-yield investments and AI-driven demand for energy/data centers.
- Secondaries: Explosive growth—over $200 billion in deal flow, reflecting the “liquidity solutions” trend.
  - “The secondary business that provided $200 billion plus worth of deal flow, which by the way was an all-time record...” (13:17)

Returns: Headwinds and Context

Buyout returns remained robust for deals that found exits, but the industry struggles with insufficient liquidity events for many LPs.
U.S. stock market comparison:
- S&P 500 10-year returns now match those in private equity, but are skewed by a narrow set of outperforming "Mag 7" tech stocks.
  - “If 17 stocks are driving 75% of my return, can I bet on that for the next five or 10 years?” (16:44)
- Diversification argument: Private equity offers portfolio balance as public markets become shallower.

The Inflection Point: “12 is the New 5”

Key Concept:
- To generate a 20% IRR, annual EBITDA growth in buyouts now needs to average 12% versus 5% a decade ago (19:00).
  - Driven by higher debt costs, less available leverage, and entry/exit multiples.
Industry Maturity and New Realities:
- The benign era of zero rates “masked the maturation of the industry.”
- Now, prices and competition are up—winning requires distinct strategic edge.
  - “It is pricey out there...cost is up. Raising capital has gotten more expensive...” (24:22)
Cost and Revenue Pressures:
- GPs face rising operational and fundraising expenses, while increased “co-invest” structures put pressure on revenue (fees).
- “Co-invest is about $1 of every $3 raised to be put to work. … Fees [do] not go up commensurately.” (27:20)

Strategic Imperatives for GPs

What Does Industry Maturity Mean for Strategy?

Three-fold Competition:
- GPs now compete for:
  1. Talent
  2. Capital
  3. Deals (29:45)
Strategy Requirements:
- Must be differentiated, repeatable, and protected by "moats."
- “You need a repeatable, differentiated model in order to succeed, with real moats built around it...” (33:10)

Practical Shifts in Behavior

Proactive Sourcing:
- Build pipelines of desired assets years ahead, not just passively screening deals.
- “I need to begin building my own pipeline of assets that I want to own, perhaps years before those assets come to market...” (36:05)
Integrated Underwriting:
- Full potential due diligence now includes operational, commercial, and technological (especially AI) assessments.
- Day one value creation plans are essential for speed to EBITDA growth.
Execution Muscle:
- GPs must execute value creation plans immediately; slow value creation at high prices is riskier than ever.
- “Time is your enemy. There's a lot of change in the macro economy...the faster you get EBITDA wins on the table, the faster you're on the path to successful returns and generating alpha.” (39:13)

Notable Quotes & Memorable Moments

On Market Concentration:
- "If 17 stocks are driving 75% of my return, can I bet on that for the next five or 10 years?" – Hugh MacArthur (16:44)
On Liquidity and Fundraising:
- "Having a fourth straight year, which is unprecedented by the way, of it being less than 15% [distributions to NAV] is really straining most LPs’ ability to recommit to the industry..." (08:50)
On the Industry's Inflection Point:
- “We're saying at Bain that 12 is the new 5.” (19:00)
On New GP Strategy Requirements:
- “The time has come for every GP to boldly state its ambition and then to create real plans to achieve a strategy that allows access successfully to all three of those things: talent, deals, and capital.” (32:05)
On Value Creation:
- “The faster you get EBITDA wins on the table, the faster you're on the path to successful returns and generating alpha.” (39:13)

Timestamps for Key Segments

[01:16] – 2025 private equity activity: deals and exits
[03:43] – Decline in deal and exit volume despite large sums
[09:22] – Fundraising landscape and buyout-specific woes
[13:17] – Secondaries explosion and need for more liquidity solutions
[16:44] – Public vs. private equity returns (and concentration risk)
[19:00] – Industry inflection point: "12 is the new 5"
[24:22] – Rising costs for GPs across the board
[27:20] – Revenue pressures from co-investment structures
[29:45] – The three competition fronts for GPs
[32:05] – Strategic shift required for long-term success
[36:05] – Proactive sourcing and deal preparation
[39:13] – Imperative for immediate value creation post-close

Tone and Language

Hugh MacArthur delivers the report with a blend of cautious optimism and pragmatic realism, urging listeners to embrace complexity, nuance, and the need for thoughtful, active strategies. He frequently supports his arguments with data, sector anecdotes, and analogies (“duck on the pond”), speaking directly to private equity professionals who must adapt to a changing environment.

Summary Takeaways

The industry shows signs of recovery but only for those able to deploy large amounts of capital—a trend marked by fewer, larger deals.
Headline fundraising looks stable, but buyout fundraising—and thus, much of the traditional market—is under continued stress.
Returns remain relatively strong, but public markets are a tougher benchmark, and industry “maturity” means winners must differentiate more proactively.
“12 is the new 5”: required growth and operational performance expectations for GPs are higher than ever.
All GPs must now compete aggressively for talent, capital, and deals; clear strategy and value creation capability are minimum requirements for success.
Speed, specialization, AI-driven diligence, and proactive sourcing are emerging as best practices.

For those interested in deeper analysis, a full report and global webinar are available via the episode notes.

Transcript

A (0:00)

Foreign. Has just released its 2026 global private equity Report. And at long last, we're seeing unmistakable signs of recovery for some investors. Those with the ability to write the biggest checks and do the largest deals definitely saw gains in deal activity in 2025 and in exits. But will the rest of the industry follow suit in 2026? With DPI at below normal rates for the last five years, and with major macro uncertainties clouding the, it's difficult for LPs to really understand how their GP partners are doing. In many instances, this contrasts with a prior period of zero central bank interest rates, stable GDP growth and ever increasing multiples. In many ways, that earlier period masked the maturation of the industry, and we're beginning to see what that means. Today on the show, I'll share my key takeaways from Bain's 2026 Global Private Equity Report, including how the private equity industry may be facing an inflection point and how today's volatile equity markets may be indicative of what we're going to face over the next five or ten years, much more so than the past ten. I'm Hugh MacArthur, chairman of Bain's private equity practice, and this is dry powder. Today's private equity annual report is themed Gaining Traction. But are we really? There are many instances in which it looks like private equity markets did do very well in 2025. That's undeniable. We had over $900 billion worth of deals done. That's the second biggest number ever to 2021. So lots of money going out and being productively put to work by GPS. We had over $700 billion worth of exits in 2025. That's one of the largest numbers ever for the exit market. So lots of money coming back in theory to LPs. We had $1.3 trillion raised for all private asset classes in 2025. That's the same number as 2024. So it didn't go down. Despite what many of us have been seeing and reading about the squeeze in fundraising and the returns for the asset class, private equity in particular were robust. So what is the issue here? Well, as usual, when you talk about private equity, you need to talk about things with nuance. Yes, there were $900 billion worth of transactions done in 2025, but the number of deals actually decreased by about 6%. How can that be true? Well, it can be true if we have a lot of very large deals. And in fact, we had 13 deals that were over $10 billion, an unprecedented amount, including the largest deal ever the $57 billion take private of EA. And so very few deals actually soaked up a lot of that capital in terms of the total enterprise value that was being deployed in 2025. Now, the first half of 2025 was quite stressed by tariffs and other macro issues. People worried about recession, so not a lot of money. The last two quarters, if you're just looking for momentum, were actually incredibly strong. In fact, the third quarter of 2025 was the biggest quarter for deal making ever in the history of the industry. So definitely some good news there. But overall, the number of deals done declining is a little bump in the road. Now, what about that exit number I talked about? $700 billion plus in exits. Again, wonderful number, but number of exits down 2% in 2025 versus 2024. And again, the issue was very large deals. If you were part of the Medline IPO or one of those other very large deals that was cashing out in some way, you did extraordinarily well. If you weren't part of one of those very large exits, then chances are you're still feeling relatively stressed. Now let's turn our attention to fundraising. I mentioned that the total amount of fundraising for all private asset classes was $1.3 trillion in 2025, which is around the same number as 2024. And isn't that okay? Well, if you're in the buyout business, it wasn't okay at all because buyout fundraising was down 16%. It was down 16% because we continue to see the kind of stress in liquidity for traditional institutional investors that we've been seeing for the past four years. In 2025, it was yet another year of distributions to net asset value and buyouts being 15% or less, that's more like an eight year capital cycle. If you're an LP, no LP writes their spreadsheets planning on eight years of capital deployment and recycling. It's more like four. So having a fourth straight year, which is unprecedented by the way of it being less than 15% is really straining most LPs ability to recommit to the industry because they need that liquidity back first. So buyout fundraising remains incredibly stressed. How could we be flat if the single biggest private equity asset class was down 16%? Well, it's because there was a lot of excitement in other asset classes. In infrastructure, for example, you have durability and persistence of cash flows. Infrastructure is often reflected with long term contracts that one can bet against. Obviously, AI is generating excitement everywhere. So whether you're talking about data Centers or the energy sources to power those data centers. There are lots of places with long term contracts to put capital. Energy in itself is an infrastructure sub asset class that's generating a lot of excitement. Both the transition from hydrocarbon to more green forms and renewable energy, but also back to hydrocarbon again because we need so much energy to power the AI revolution. Another area of infrastructure is this concept of reshoring or near shoring, but taking supply chains and diversifying them and creating ecosystems of businesses for certain industries that are going to be either closer to home base or back to home base. So numerous opportunities in the infrastructure space again attached to those long term contracts that create predictability of cash flows are generating a lot of excitement among investors. The other area I'll call out that was up substantially in terms of fundraising in 2025 is secondaries. Secondaries is a term I'm not even sure how long we're going to be using in the marketplace because it's really about liquidity. Yes, it's about LP LED secondaries, yes, it's about continuation vehicles and GP LED secondaries, but it's also about bespoke unique liquidity solution products that are growing at a breakneck pace. And when you think about an alternative industry that has over $20 trillion worth of assets and last year a secondary business that provided $200 billion plus worth of deal flow, which by the way was an all time record 200 billion on 20 trillion just doesn't compute in an illiquid set of asset classes. So that 200 billion number needs to get a lot bigger. And many investors realize this. And those that are being innovative, those that are finding really attractive places to deploy capital, are continuing to attract that capital in the marketplace. So while that 1.3 trillion number on the surface actually seems pretty solid underneath, there are a lot of moving parts like the duck on the pond with a lot of churn. Making it a more complex issue than simply saying fundraising was flat. Well, what about returns? Returns as I mentioned, certainly in the buyout industry for most things that were sold were actually quite good. And so what's the problem there? Well, problem there is we'd like to see more exits. As I mentioned, exits were down. And secondly, the US stock market in particular has been roaring. In fact, the 10 year return for the US stock market measured by the S&P 500 is about the same as the average for private equity. And so why isn't everyone running and putting all their money in the US public equity then? Well, once again, it's not as simple as that. If you look at 20, 25, just seven stocks, yes, the famous Mag 7 drove over 40% of all of the stock market gains. In fact, 17 stocks drove 75% of the S&P 500 gains. But how much money can you put into that before you say to yourself, well, wait a minute, I need some diversification here. Because if 17 stocks are driving 75% of my return, can I bet on that for the next five or ten years, or do I want to bet everything on that for the next five or 10 years? Is a very relevant question. And of course, most investors feel like for the historical attractive returns that an asset class like private equity provides, you need that. And you also want the diversification because the public markets are becoming more shallow. The average number of issues in the US public markets for equity are half what they were 30 years ago. And no one is forecasting that the number of public companies is going to increase dramatically over the next five or 10 years. Perhaps that'll happen, I don't know. But right now, as you look at the space, you certainly want to be invested in the US public markets, but you also want to the kind of diversification and return access that the private markets and the private equity markets provide as well. So I think we are gaining traction as an industry in private equity. And that traction will make itself evident in the first half of 2026, absent any Black swans that none of us know about now. But we at Bain think also that this industry has hit an inflection point. Let me start by describing this inflection point with some numbers. We're saying at Bain that 12 is the new 5. Now what does that mean? It means that EBITDA is going to have to roughly grow at something like 12% a year in the typical buyout in order to hit a 20% IRR versus the 5% EBITDA had to grow at about a decade ago. Now that's a reflection of the cost of debt, the amount of debt you can put on a deal, the average multiple at entering a deal, the average multiple and exiting a deal that we see in today's environment as compared to the environment a decade ago. Any way you slice it, it's going to be harder. Now let's unpack why 12 is the new 5. We're seeing a K shaped recovery, if I can use that term. The elite platforms that are delivering both IRR and ROI are up, but many firms are stuck. The issue is what people thought was maybe a new normal in the industry was actually an anomaly. And I'm Talking about the 10 year period where central bank interest rates were zero and year after year debt was cheap, GDP growth was positive. And therefore I had kind of a built in multiple expansion mechanism going as the next buyer could have the same interest coverage and pay a higher multiple that I had entering a business. And with multiple expansion returns were great. So we had an unprecedented decade of zero central bank interest rates that helped power the industry. And it also did something very important. It masked the maturation of this industry. Because over that 10 year period, the size of the buyout industry tripled and the competitive intensity became much, much greater. But in probably the most benign times possible, the returns masked all that. And now that we're back to times of real interest rates that aren't zero, and we're back to times of having some macro upheaval in the marketplace, it's very unclear who the winners and who the losers are going to be. But what is clear is, is that prices are up, competition is going to keep the prices up, and that investors now need a strategy in order to become a long term winner in this industry. And that's why we're at an inflection point. So what are some signs that we're in a more mature industry now? In buyout number one, I'd argue that it's more expensive to generate alpha than ever before. It is pricey out there. Whether you're talking about investing in greater subsector expertise, sourcing technology and AI, better value creation ecosystems, better advisory networks, you name it, the cost is up. Oh, and by the way, raising capital has gotten more expensive because of the liquidity squeeze. Or perhaps you're going after private wealth that takes more investment. Or perhaps you want more from the sovereign wealth market that takes more investment. So there is no doubt that most GPs are feeling their costs go up now. At the same time, something that's lesser known is that there is actually pressure on revenue. Revenue is measured by fee bearing aum. There is something called co invest that's been in the market for a long time. But 15 years ago, Co invest was highly irregular, done in very small amounts, not expected by most LPs. By our best estimate today, co invest is about $1 of every $3 raised to be put to work. So many investors are dealing with a natural discount, if you will, by having their AUM go up, but by having fees not go up commensurately. Because co invest typically does not come with economics attached to it. Put that in combination with some of the largest LPs that are writing checks don't want to pay the number on the book and don't expect to. They expect to pay a lesser number for a much bigger check. And you've got revenue pressure on GPS as well. So cost pressure, revenue pressure, pressure to generate alpha means mature industry. Now, that's not a bad thing, that's not a reason to go running, panicking into the streets. But what it does mean is you absolutely need to have a strategy as a GP for the first time in this industry. Now, a strategy, in my view, addresses three things. GPS compete for talent, they compete for capital, and they compete for deals. Those are the three things. And the time has come for every GP to boldly state its ambition and then to create real plans to achieve a strategy that allows access successfully to all three of those things. The best talent, the deal opportunities that are most appropriate for that GP, and the capital to fuel both of them. Now, the reason why this is important is because generating alpha is going to be more difficult than it has before. And that means you need a repeatable, differentiated model in order to succeed, with real moats built around it that are going to prevent competitors from coming and poaching your deals, or poaching your sources of capital, or poaching your talent. And that can take many forms. You might be a sector expert, you might underwrite certain types of investment theses and opportunities better and more often than anybody else, you might do any number of things on the value creation side that others fear to tread in doing. But whatever it is, it needs to hang together as a model. It needs to be focused on a total addressable market that's big enough to allow the investment world to believe that you can continue to do it year after year. Because let's not forget, private equity is the longest running business and it takes a long time to figure out whether you're winning or losing in most cases. And so therefore, these things need to be provable both in what you say, but also in the deals that you've done. So what does that mean in practice? That means, number one, I need to get a lot more proactive about my sourcing. If I have a real strategy and a real focus, that means I'm not waiting for a thousand sims to come in the door anymore and find the two or three that I like the best and close those deals at the end of the year. I need to begin building my own pipeline of assets that I want to own, perhaps years before those assets come to market, but I learn about them, and when they do come to market, I have the confidence of moving fast at the right price and be the winner, because those deals should be my deal. So building your own pipeline versus waiting for the Sims to come in the door is the name of the game when it comes to developing a real competitive edge in sourcing underwriting. Underwriting is now much more about full potential due diligence than ever before. That means commercial due diligence needs to work together with operational due diligence, which needs to work together with technological due diligence, including AI. All of those need to work together to form a value creation plan. That means on day one, you can start to get speed to value. Speed to insight is about underwriting and diligence and learning and stage gating and making sure that all of those avenues of value that you're so good at getting because you're focused are really there in an asset and then quickly flipping the switch in the diligence process so that on the first day of ownership you're ready to go and get that speed to value and make sure that you get that EBITDA growth as fast as humanly possible. That's the name of the game in differentiated underwriting. And then of course there is the muscle, the ecosystem, to actually execute on the value creation plan, to hit go the day that you own that asset. Because time is your enemy. There's a lot of change in the macro economy. There's a lot of change in different industries driven by AI and other types of disruptions. So the faster you get EBITDA wins on the table, the faster you're on the path to successful returns and generating alpha. If you'd like to read the full 2026 global private equity Report, click on the link in the Episode Notes. I'd also encourage you to join me for a global webinar on March 5, where I'll dive deeper into many topics, such as the complexity of exits, the development of exit channels in 2026, and and what real differentiation and alpha generation look like in the GP world. If you'd like to sign up, please click on the link in the Episode notes. I'm Hugh MacArthur. Thank you for listening.