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Donald Trump’s trade war has slammed the brakes on a global dealmaking recovery for the private equity industry, with a new forecast indicating that a long-awaited rise in dealmaking has reversed since the US president’s “liberation day” tariff announcements.
The value of deals for buyout funds to purchase companies in the second quarter is on course to fall by 16 per cent from the first three months of 2025, according to projections from consultancy Bain & Company. The figure for April was down 24 per cent on the monthly average for the first quarter.
The private equity industry had hoped for a dealmaking boom under the second Trump administration, with a more business-friendly attitude and regulatory easing expected to put an end to a two-year downturn in the sector.
But instead, the uncertainty unleashed by Trump’s trade and tax policies has cut short the resurgence, making many assets impossible to value and slowing dealmaking in all but the most insulated sectors.
“It’s not that the market has stopped but that it has narrowed in the sense that the ability of the sponsors to transact has shrunk to a few sectors that are relatively tariff-resilient,” said Simona Maellare, co-head of the alternative capital group at UBS.
An executive at a large UK private equity group said Trump’s tariff announcements in April, some of which were later delayed or diluted, had caused “a massive withdrawal of confidence for any new deal-doing in the US for at least the medium term”. “I’m not sure that’s quite what Trump intended,” the executive added.
The value of assets fully or partially sold by buyout funds is also on track to fall 9 per cent in the second quarter.
The data highlights the mounting difficulties for the private equity industry, after several years in which a lack of exits from portfolio companies has left traditional backers such as pension funds and endowments with less money to commit to new funds.
For the first time in a decade, no buyout fund closed in the first quarter had raised more than $5bn of capital, Bain said.
Fewer distributions to investors by buyout funds and a struggle to deploy “dry powder” already committed has meant that firms trying to raise money for new funds have found themselves in intense competition for every dollar of capital available.
New vehicles across the alternative asset management sector, including real estate and credit investments as well as traditional buyout funds, are now seeking $3 from potential investors for every $1 of supply, according to Bain.
That imbalance is the highest since at least 2011, the consultancy added.
“In January, everybody was very optimistic and a lot of things were happening,” said Jan-Hendrik Horsmeier, a partner at law firm Clifford Chance.
Investors had now shifted their focus to “services-heavy” assets less impacted by trade barriers, Horsmeier said.
After two-and-a-half years in which valuations were upended by the rapid rise in interest rates and borrowing costs, private equity firms have struggled to exit their investments through the traditional routes of initial public offerings or full sales.
Investors in private equity funds polled by Bain and the Institutional Limited Partners Association said in March that they were increasingly dissatisfied with dealmakers only partially exiting their portfolio companies, for example through minority stake sales.
More than 60 per cent of investors said they wanted to see conventional full exits of companies, even if it meant selling at a lower valuation.
https://www.ft.com/content/c4681db5-b939-4d4a-84d6-6b8f9405281a
