Private Markets: 2025 Could Be the Year for a Comeback – Is M&A the Key?

 

So, could 2025 be the year private markets start bouncing back? Investors are cautiously optimistic, hoping that more M&A deals and a friendlier business environment will give things a much-needed jolt. With interest rates falling and President-elect Donald Trump potentially pushing pro-business policies, liquidity might just start flowing again. It’s looking positive overall, but of course, there are still a few wildcards to keep an eye on.

 

 

The big question for 2025: will we see a spike in mergers and acquisitions? If M&A picks up, private markets could see a serious boost. With Trump in office, there’s hope that his business-friendly stance will get deals moving again, helping unlock liquidity that’s been stuck for years. As Raphi Schorr from HighVista Strategies says, “The health of the M&A market will have an impact on everything, including credit.” If M&A really takes off, expect to see positive ripples across private credit, equity, and more.

 

This could also benefit private credit markets. We’ve seen a lot of competition in sponsor-backed lending lately, but with more M&A activity, demand for credit could rise, potentially widening spreads and improving returns. We don’t know for sure how this will play out, but there’s definitely potential for some big changes in liquidity.

 

 

Speaking of private credit, this sector has been holding up pretty well, even in a tough fundraising environment. It’s likely to stay strong into 2025, especially with demand for middle-market loans still looking solid. The downside? With interest rates falling, spreads might narrow, which could limit returns. But here's the silver lining: if M&A activity picks up, that could change things. More deals = more credit demand = higher returns.

 

That said, it’s worth keeping an eye on private credit’s transparency. With more retail investors jumping in, there’s a risk of overexposure if people don’t fully understand how it works. But overall, private credit remains a strong performer in the market.

 

 

Private equity has had a tough time lately, especially after the overinvestment in 2021. But a few things are lining up that could turn things around next year. The interest rate cuts, potential M&A activity, and capital starting to return to LPs (limited partners) in secondary markets all point toward a more favorable environment for private equity.

 

 

Tyler Adkerson from WTW is “cautiously optimistic” for 2025, pointing out that a few IPOs in 2024 actually performed well. If the economy and markets stay on track, we could see IPO activity pick up in the second half of 2025. It’s not likely to be a flood of IPOs, but a few successful ones could set the tone. Expect private equity to continue relying on secondary markets, joint ventures, and continuation vehicles for exits, though.

 

 

Real estate and infrastructure are also looking promising for 2025. Data center real estate is set to see more demand as industries continue to digitize. And while office real estate still has its struggles, sectors like medical offices and senior housing are starting to stabilize—definitely something to keep an eye on for long-term investors.

 

On the infrastructure side, clean energy is a big deal. Solar power, battery storage, and offshore wind are all going to keep attracting capital, regardless of political shifts. For those with a long-term mindset, these areas could provide steady, reliable returns as the world moves toward greener energy.

 

 

Even with all this optimism, there are still risks. A mild recession or slower economic growth could throw off some of the more aggressive predictions. Private equity fundraising might continue to struggle, especially with some of those overinvested assets from previous years still weighing on the market. But, as usual, secondary markets and joint ventures will probably be the go-to strategies for exits.

 

The private credit boom also has some unknowns. S&P Global recently raised concerns about opacity in the market, suggesting that new lending activity might not be fully reflected yet. But, as long as liquidity returns and M&A starts moving, the outlook for private markets is still pretty solid.

 

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