Private Equity Exits & Liquidity in Europe: A Market Caught in the Crosscurrents

After years of buoyant exit activity, the landscape in 2025 reflects a pronounced slowdown in liquidity events, amid shifting macroeconomic conditions, valuation uncertainty, and geopolitical disruptions. As of Q2 2025, PE exits in Europe have fallen for a second consecutive quarter, with total exit value down 22.9% quarter-over-quarter and exit count declining by 11.5%. This marks one of the weakest exit environments since 2019, with mega-deals becoming scarce and the ratio of deals to exits rising to 2.8x from 2.2x in 2024.

Exit Composition: The Retreat of the IPO Window

The structure of exits has changed substantially over the past five years. Corporate acquisitions continue to represent the largest share of exit value, although even this channel has softened in 2025 to €95.3 billion as of August. Sponsor-to-sponsor deals have recovered slightly, reaching €123.3 billion, but remain well below the peaks seen in 2021. Public listings, meanwhile, have virtually disappeared as a viable exit route—only €6.1 billion year-to-date in 2025, compared with €121.9 billion in 2021.

The sharp contraction in IPO activity underscores a broader retreat of the public markets as an exit avenue for private equity. The 2021 boom—fueled by abundant liquidity, strong valuations, and investor appetite for growth—proved fleeting. Since then, the combination of higher interest rates, regulatory tightening, and lower equity risk tolerance has effectively closed the IPO window. Even when listings occur, they tend to be smaller, lower-growth stories that struggle to capture investor enthusiasm.

Corporate buyers, once expected to sustain exit momentum, have also become more selective. With financing costs higher and balance sheet discipline tightening, many corporates have shifted toward bolt-on acquisitions rather than full takeovers of PE-backed assets. This dynamic has kept overall liquidity muted, while leaving sponsors holding larger inventories of mature portfolio companies.

Relative Performance: Exit Channels Normalize Below 2015 Baselines

When indexed to 2015, all exit types have trended downward from their post-pandemic peaks. The 2021 outlier—driven by unprecedented monetary support—saw IPO exit values surge more than 250% above 2015 levels. Yet by 2025, public listings are operating at less than one-tenth of that scale. Both sponsor and corporate acquisitions have stabilized near or below 2015 baselines, indicating a normalization process in a structurally tighter capital environment.

Private equity sponsors are responding to these constraints by extending holding periods. Median holding times have climbed from 2.7 years in 2018 to 3.6 years in 2025, reflecting both the difficulty of achieving desired exit multiples and the reluctance to crystallize returns in a volatile valuation landscape. In some cases, continuation funds and GP-led secondaries have been used to bridge liquidity gaps, but these mechanisms remain niche relative to traditional exits.

Macro Backdrop: Higher Rates and Valuation Friction

Monetary policy has played a decisive role in reshaping Europe’s private equity exit environment. The European Central Bank’s benchmark long-term rate has risen sharply from near zero in 2021 to around 3.1% in mid-2025. This repricing of capital has had dual effects: compressing valuation multiples and raising the opportunity cost of equity.

The sustained elevation in rates has reduced leverage capacity across the buyout spectrum, particularly for highly leveraged large-cap deals that once dominated exit volumes. At the same time, higher discount rates have depressed the net present value of future cash flows, complicating the price discovery process between buyers and sellers. As a result, many GPs have chosen to delay exits rather than accept discounted valuations.

The tightening financial conditions have also redefined liquidity preferences. Limited partners (LPs) are pressing sponsors for distributions amid vintage congestion, yet secondary market liquidity is limited. Funds launched in 2018–2020 vintages now face maturity pressures without clear exit pathways, creating a growing overhang of unrealized value in the system.

Strategic Adaptation and Outlook

The adjustment underway in European PE exits may be structural rather than cyclical. Sponsors are increasingly reorienting strategies toward longer-term value creation, operational improvement, and add-on acquisitions, rather than relying on multiple expansion at exit. In parallel, there has been a renewed focus on credit and structured equity strategies, which can provide partial liquidity to LPs while deferring full exits.

Sectorally, technology and energy transition assets remain bright spots, supported by EU industrial policy and sustained investor demand for digital and green infrastructure. However, even these segments face valuation recalibration as capital costs remain elevated.

Looking ahead, a sustained reopening of the IPO market seems unlikely until interest rates stabilize and public market valuations recover. Corporate M&A may provide modest relief if the macro backdrop improves, but with economic growth subdued and cost of capital elevated, the pace of large exits will likely remain constrained.

In this context, 2025 is shaping up as another year of strategic patience for European private equity. The industry’s liquidity cycle—once synchronized with cheap credit and exuberant public markets—is now governed by a more disciplined calculus. Until monetary easing or renewed confidence unlocks new exit channels, the European PE market will continue to prioritize portfolio optimization over distribution velocity.

Sources & References

European Central Bank. (2025). Long-term interest rate for convergence purposes - 10 years maturity, denominated in Euro - Euro area 20 (fixed composition) as of 1 January 2023 (IRS.M.I9.L.L40.CI.0000.EUR.N.Z). https://data.ecb.europa.eu/data/datasets/IRS/IRS.M.I9.L.L40.CI.0000.EUR.N.Z 

Pitchbook. (2025). European PE Breakdown. https://files.pitchbook.com/website/files/pdf/Q2_2025_European_PE_Breakdown.pdf