Inside the 2025 Exit Cycle: Structural Shift or Another False Start?

The private equity industry enters 2026 in a state of cautious re-acceleration. After two years of stalled realizations, elongated hold periods, and widespread LP pressure, exit activity is finally showing signs of life. To unpack what’s driving this shift—and what still threatens it—we spoke with Peter Witte, EY’s Global Private Equity Lead Analyst and one of the most respected voices dissecting PE liquidity trends worldwide.

What follows is a distilled, insight-driven view of where the exit market truly stands today—and the strategic implications for GPs, LPs, and corporate acquirers.

1. Exit Momentum Is Rebuilding—But Conviction Will Require 3–6 More Months

Witte characterizes the market as being in a tentative recovery phase. Deployment has risen steadily for more than a year, but exits have lagged, disrupted by repeated “false starts.”

Still, several hard indicators now point toward a more durable rebound:

• A rising count of announced exits
  

• Larger deal sizes compared with the past 18 months
  

• Most importantly, stronger settlement activity, signaling deals are actually closing

The next three to six months will determine whether this becomes a true structural recovery or another short-lived uptick.

2. The Long-Held Asset Overhang Is the Industry’s Real Bottleneck

While companies exiting within the traditional PE hold window are trading relatively well, the challenge lies in the 6–7+ year vintage cohort that many firms have been forced to extend.

EY’s data underscores the scale of the issue:

• Half of GPs would accept a 5–10% valuation haircut to clear aging assets
  

• A quarter are prepared to take 10–20%

This signals a shift in mindset: GPs are increasingly willing to crystallize imperfect outcomes to reset portfolios, improve DPI, and reallocate capital to higher-productivity assets.

3. Strategics Have Quietly Become the Most Important Buyers of 2025

Last year’s exit market leaned heavily on secondary sales. But throughout 2025, corporates have firmly taken back the driver’s seat.

Witte attributes the shift to:

• A broader resurgence in global M&A, particularly in the past six months
  

• Corporates operating with greater confidence despite macro uncertainty
  

• A recognition that volatility is now a persistent condition, not a temporary dislocation

Put simply: both PE and strategics have stopped waiting for clarity—and are transacting in spite of it.

4. Continuation Vehicles Are Becoming Institutionalized—But Alignment Remains Critical

LPs remain selective on continuation funds and GP-led deals, with alignment of interest still the defining concern. Yet the direction of travel is unmistakable:

• Many assets will spend most of their lives in private markets
  

• A deeper secondary ecosystem is becoming a structural necessity
  

• The private markets will ultimately move closer to a public-market-like equilibrium, where secondary trading represents a larger share of activity

Continuation vehicles are no longer a workaround—they are evolving into a standard liquidity mechanism.

5. NAV Financing and Preferred Equity Bring Efficiency—and New Blind Spots

As GPs increasingly rely on NAV loans, preferred equity, and other liquidity solutions, Witte highlights two overlooked risks:

1. Credit risk and underwriting discipline, especially as structures become more complex
   

2. The tendency for these tools to become permanent features of the market once introduced, with cyclicality in their usage but no true retreat

The lesson: these instruments are powerful, but demand rigorous, cycle-aware risk management.

6. The Macro Wildcards: Rates, the Affluent Consumer, and the AI CAPEX Cycle

EY’s macro view highlights three variables that will determine market stability—and exit durability—over the next year:

• The trajectory of interest rates relative to expectations
  

• The resilience of U.S. consumer spending, especially among affluent households
  

• The durability of AI-driven CAPEX, which has become a major demand engine

With public markets hitting new highs repeatedly, any correction could send ripples across private valuations and sentiment.

Conclusion: A Market That Is Learning to Operate Through Uncertainty

The defining theme of 2026 is not clarity but adaptation. The industry is gradually accepting that volatility is the new baseline—and adjusting its behavior accordingly.

Exits are improving, strategics are reasserting themselves, LP attitudes toward GP-led liquidity are evolving, and firms are increasingly cleaning up long-held portfolios to restore DPI and momentum.

The recovery is taking shape. But as Witte emphasizes, the next few months will determine whether it becomes a structural turning point or just another temporary upswing.