When you're knee-deep in the private equity trenches, you can't help but notice the shift toward smaller deals this year. Cherry Bekaert dropped their Mid-year PE Industry Report, showing that while money was still on the move—$461 billion worth to be exact—it was down 10.6% from the first half of 2025. But let's not get ahead of ourselves here. Deal volume barely budged, cementing the fact that while big-ticket splashes weren't happening as often, those smaller platform deals and add-ons kept the train running.
The Frayed Nerves from High Rates and Inflation
Now, you can't ignore what higher-for-longer interest rates are doing to the landscape. The Federal Reserve hasn't backed down, keeping things tight and expectations shaky. Toss in some energy-driven inflation, courtesy of the scrap over in Iran that's messing with energy markets, and you've got plenty of reasons for some jittery sponsors.
And if that wasn't enough, there's the AI monkey wrench. Everybody and their mother is sweating over how artificial intelligence could upend competitive dynamics. So, what's a sponsor to do? Turns out, navigate the storm by sticking to what they can price and predict—meaning smaller, more manageable deals.
Deals, Deals Everywhere, But Not a Big One to See
Diving into those numbers, transaction volume was basically in holding pattern mode. Cherry Bekaert's figures show 2,384 deals passed the finish line in Q2, flat from Q1 but a healthy 11.5% increase year over year. Here's where it gets interesting: five meaty deals exceeding $2.5 billion pulled in a paltry $25.9 billion, marking a nearly 60% year-over-year plunge.
Interestingly, the bread and butter shifted to add-ons, snatching up about three-quarters of buyout activity. As for the software segment, it tanked—dropping a staggering 65.7% in value. Yet there's a silver lining for those with energy plays, riding an 80.5% uptick, fueled by data center energy demands.
Exits, IPOs, and the Ever-Present Dry Powder
"Each of the three shocks landed on the same question: what is this business worth when we sell it?"
Scott Moss, a Partner over at Cherry Bekaert, hit the nail on the head. Sponsors are navigating through choppy waters with exiting proving particularly hard, down 46.3% to $102.6 billion. Yet, the appetite for initial public offerings (IPOs) ramped up—jumping 42.2% as IPO offerings doubled.
And looming in the background, we've got this mountain of dry powder just itching to be put to work, holding steady at about $1.07 trillion. It's a waiting game—until the conditions align or someone makes the first big move.
The Months Ahead: More of the Same or a Shift?
The rest of 2026 could stay uneven. The safe money's on steady carve-outs and take-private transactions, holding up deal flow like old reliable friends. Meanwhile, liquidity solutions and the evolving private credit scene are poised to shift gears given any seismic market changes.
For those with skin in the game, it’s a must to keep these trends locked in your sights. Because as the landscape evolves, so too do the opportunities—and the potential pitfalls.
Cherry Bekaert's full report is your map through this tangled web of interactions. But remember, the nature of this business lies in staying sharp and ready to pivot. Now go, dive into those numbers, and get a sense of where the tides are headed next.
