Private equity groups return to dealmaking as credit markets reopen
Buyout firms that sat on the sidelines through 2025 are moving quickly on mid-market acquisitions as lending conditions ease and sellers adjust their price expectations.
Private equity firms are accelerating dealmaking after a prolonged period of restraint, with leveraged buyout activity rising sharply in May as lending conditions improved and sellers, after months of resistance, began adjusting valuations closer to market rates.
The Logjam Breaks
The recovery in deal activity follows what many in the industry describe as the most difficult 18 months for deal origination since the financial crisis. Rising rates through 2024 and early 2025 made leveraged financing prohibitively expensive, pushing many sponsors into portfolio management mode and away from new acquisitions.
The shift began in earnest in the second half of 2025 as the Fed signalled its peak and credit spreads started to compress. Several large syndicated loans that had been pulled from the market earlier in the year were relaunched and successfully priced.
MARKET SIGNALS
- LBO loan spreads down 65bp since October 2025 peak
- Deal count up 28% year-on-year in May 2026
- Median entry multiple: 11.4x EBITDA, down from 13.2x at 2021 peak
Fund managers are particularly active in the mid-market, where competition from strategic buyers has been limited and management teams at target companies have been willing to accept lower headline prices in exchange for transaction certainty.
