147 Introduction As the world continues to be shaped by geopolitical uncertainty, the M&A market has weathered significant headwinds with an encouraging rebound in 2025. US private equity (“PE”) has remained the leading source of capital and liquidity for companies of all sizes, with buyout values rising 44% from 2024 to $904 billion and exit values jumping 47% from 2024 to $717 billion, the highest it’s been in both categories since the deal boom of 2021 1. Behind these numbers, however, is a more nuanced picture. Capital is harder to raise, dry powder is aging, holding periods on portfolio companies are longer, and the regulatory landscape remains unpredictable. PE funds that are performing well have done so not by waiting out these pressures, but by adapting to them — deploying capital more selectively and with greater discipline than in prior cycles. This article looks at forces shaping the current M&A market for PE funds. Market dynamics and liquidity constraints are now reshaping how PE funds operate leading to extended holding periods on assets. Sector-specific investment trends in aerospace and defense, retail, healthcare, renewables and energy, and technology now define the M&A market. The article addresses the current M&A market in the US and globally, and the continued growth of US PE and strategic investors in the growing Israeli economy. Part I – the Current PE M&A Market 2025 was defined by megadeals, with 13 transactions in the $10 billion-and-above category — the highest aggregate deal value in that tier over the past ten years 1. The majority of these megadeals were driven by sovereign wealth funds and corporate buyers with deeper pockets than PE funds. PE funds, in turn, have been hampered by heightened competition, higher interest rates, and elevated valuations, all of which have contributed to more selective limited partners (“LPs”). Against this backdrop — and with over $1.3 trillion in dry powder, much of it raised in 2022 and 2023 — PE funds are increasingly targeting companies with stronger EBITDA growth profiles in order to achieve successful distributions and attractive returns on capital. Ten years ago, 5% annual EBITDA growth was sufficient to hit a target return. Today, however, most funds target 10–12% annual EBITDA growth as the threshold necessary to generate a 2.5x return 2. This dynamic has caused average holding periods of portfolio companies to increase from five years in 2010 1. Bain & Company, Global Private Equity Report 2026, p. 4. 2. Id at 5. 3. 2 Id at 32. to approximately seven years in 2025. The rationale is if a portfolio company’s EBITDA has not grown sufficiently to justify a sale at a price that would deliver the targeted returns, the fund should hold the company longer to allow for earnings to improve. However, the data cautions against over-reliance on this strategy. While many General Partners (“GPs”) appear to be extending hold periods in an effort to drive EBITDA growth, internal rate of return tends to stagnate around year seven and decline thereafter. Faced with a constrained exit environment, GPs have turned to a range of alternative mechanisms to generate liquidity without requiring an outright sale. GP-led continuation vehicles grew 62% year over year and 37% annually since 2022. The leading strategic drivers for these vehicles are generating liquidity through existing LP cash-outs, securing new capital for M&A, and resetting the investment horizon for longerhold assets. GPs have also looked to minority interest sales, dividend recapitalizations, secondaries, and NAV loans to generate liquidity and reduce the need for incremental capital calls, with 30% of portfolio companies undergoing some form of liquidity event and $410 billion raised through these mechanisms. These tools help generate cash and allow GPs to retain assets until returns mature, but they are not replacements for exits. US — MERGERS & ACQUISITIONS
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