Global M&A trends in private capital: 2025 outlook

Global M&A trends in private capital: 2025 outlook

The more difficult funding context of the past three years, in a climate of rising interest rates, has accelerated consolidation of the private capital industry: in the first half of 2024, more than half of the total capital raised across private equity funds globally came from only 12 new mega-funds, with a value of more than $5bn, according to PitchBook data. The largest funds to close included Vista Equity Partners’ $20bn-plus eighth flagship fund in April 2024 and Silver Lake’s $20.5bn seventh namesake vehicle in May 2024. For smaller and midsize players to survive in this environment, they must have niche specialisation.

Other factors are also driving the consolidation. One is the ambition of the larger funds to cover the full range of asset classes, including private credit, which has emerged as a major source of deal funding and corporate refinancing, particularly for smaller and midsize companies. Total private credit assets under management now total almost $1.7tn globally, more than three times the 2015 total.

Private credit has proved highly competitive with more traditional bank financing. Examples of the consolidation include TPG’s $2.7bn acquisition of Angelo Gordon, an alternative investment firm focused on credit and real estate investing, in November 2023, and Brookfield’s $1.5bn strategic investment in Castlelake, an alternative asset manager specialising in asset-based private credit, in September 2024. Asset manager BlackRock has also made several recent moves to scale up its private credit operations, including its December 2024 proposed acquisition of HPS Investment Partners—a firm that specialises in both private and public credit—for approximately $12bn.

Amid this industry consolidation, one significant type of fund—sovereign capital—is shifting behaviour. Sovereign wealth funds no longer act mainly as LPs in private equity funds, as they used to, but have increasingly evolved to invest more directly. Now, some are creating their own investment teams to invest in parallel to the major funds. And they, too, are moving into private debt alongside their more traditional interest in private equity.

For example, in May 2024, the United Arab Emirates’ Mubadala announced a $4.2bn investment alongside Global Infrastructure Partners in a major Australian fertiliser venture. In the same month, Saudi Arabia’s Public Investment Fund (PIF) announced a strategic agreement with Lenovo to accelerate Lenovo’s ongoing transformation, further enhance its global presence and increase the geographic diversification of its global manufacturing footprint. In private credit, the Korea Investment Corporation announced its intention to strengthen its presence in direct lending with a particular focus on Asia, and the Abu Dhabi Investment Authority seeded the private credit platform of AGL Credit Management, an asset manager specialising in corporate credit, and committed $1bn to its first private credit fund.

These funds have substantial pools of capital: PIF, for example, has $925bn in assets under management and is looking to more than double that by 2030. Almost none of the sovereign funds mentioned here are smaller than $300bn. One advantage sovereign funds have over traditional private capital firms is that they aren’t subject to the same timeline expectations from investors and can therefore make longer-term investment plays.

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