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US middle market private equity firms remain cautiously optimistic about dealmaking, exits, and returns, despite macroeconomic uncertainty. Over half expect normalized M&A activity by 2026, while 42% anticipate two exits within the next 12 months. Expectations for returns are strong, with 90% projecting 2025 base-case returns to match or exceed 2024 levels. Usage of senior lending, co-investments, and junior capital solutions remains strong, with a notable interest in continuation vehicles.

US middle market private equity firms are cautiously optimistic about dealmaking, exits, and returns despite macroeconomic uncertainty. A recent survey by PwC indicates that over half of respondents expect normalized M&A activity by 2026, while 42% anticipate two exits within the next 12 months [1]. These expectations are buoyed by strong projections for returns, with 90% of firms projecting 2025 base-case returns to match or exceed 2024 levels [1].

The slowdown in dealmaking, driven by factors such as high interest rates, tariff policies, and geopolitical turmoil, has led to firms holding onto their portfolio businesses longer than anticipated [1]. However, there is a notable interest in alternative exit strategies, such as continuation vehicles and co-investments, to manage the current market conditions [1].

Morgan Stanley’s latest middle-market private equity fund raise of $3.2 billion in 12 months is a testament to the resilience of the sector [2]. This fundraise was driven by strong exits and a rebound in the exit landscape, with the median time to close for PE funds dropping to 13 months in Q1 2025 from 17 months in 2024 [2]. Goldman Sachs is also expanding its private equity credit services internationally, aiming to support its growth over the long run [3].

Despite the challenges, the sector is showing signs of recovery. Private equity funds are leveraging various strategies to adapt to the current market conditions and ensure the sustainability of their businesses. As the market continues to evolve, it will be crucial for firms to remain agile and innovative in their approaches to dealmaking, exits, and returns.

References:
[1] https://www.pymnts.com/markets/2025/private-equity-groups-hold-1-trillion-as-tariffs-hinder-dealmaking/
[2] https://pitchbook.com/news/articles/morgan-stanleys-latest-middle-market-fund-raises-3-2b-amid-exit-recovery
[3] https://finance.yahoo.com/news/goldmans-expansion-private-equity-credit-154800268.html