Private equity entry activity slowed in July

Global private equity entries declined in July as US tariffs and an uncertain macroeconomic outlook created friction for deal activity.

Private equity and venture capital entries totaled $52.59 billion globally in July, down nearly 7% from $56.44 billion in June and more than 29% from $74.47 billion in July 2024, according to S&P Global Market Intelligence data. The number of deals recorded globally in July totaled 911, a step down from the prior-month total of 1,103 and prior-year total of 1,232.

Private equity firms have plenty of dry powder for deals, but investment committees are behaving cautiously, said Michael Mufson, managing partner of investment bank Mufson Howe Hunter & Co LLC.

Mufson noted that the focus on top-performing businesses insulated from US tariff impacts has limited the range of potential targets and that private equity acquirers are not willing to stretch valuations for anything but the best assets.

"Quality sells and mediocre does not, and that's the market right now," Mufson said.

Interest rates

A cut to interest rates in the US could be the key to accelerating M&A activity in private equity's largest market.

Lower interest rates would lower the cost of deal financing, allowing private equity firms to potentially increase the leverage on deals and pay higher valuation multiples, which could serve as the release valve for pent-up dealmaking demand, Mufson said.

"You've got all the right ingredients for a ripping bull market," Mufson added.

Some private equity-backed M&A themes have proven resilient even against the unsteady macroeconomic backdrop, said Nick Pedersen, a Honigman LLP attorney who advises middle- and lower-middle-market private equity firms on deals. Pedersen said firms pursuing roll-up strategies in domestic, service-oriented industries that are sheltered from tariff impacts — including landscaping, car washes and janitorial services — have not been slowed by uncertainty and elevated interest rates.

"Those are smaller deals, so they're easier to finance, and they've continued," Pedersen said.

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Largest entry deal

The planned $7.8 billion acquisition of Techem GmbH was the largest private equity-backed investment announced in July.

TPG Capital LP is partnering with sovereign wealth funds GIC Pte. Ltd. and Mubadala Investment Co. PJSC to acquire the Germany-based real estate industry service provider in a deal that would see a member of Techem's previous ownership group, Partners Group Holding AG, reinvesting in the business.

Focus on TMT

In July, the technology, media and telecommunications (TMT) sector accounted for 34% of private equity- and venture capital-backed deal value. This was followed by the industrial sector with 25% of aggregate deal value, followed by the financial and healthcare sectors, each accounting for 13% of deal value.

Application software businesses were again the most likely target for private equity and venture capital deals in the TMT sector during the month.

Outlook

Even as private equity-backed deal activity slowed in July, entries for the first seven months of the year remained ahead of the total for the corresponding period in 2024.

The global transaction value for the year through July 31 was $444.67 billion, 10% larger than the $403.13 billion in private equity-backed entries recorded in the year-ago period, according to Market Intelligence data.

Mufson said large deals by global private equity megafunds were likely disguising some of the softness in middle-market private equity-backed M&A. It all comes down to risk, the executive said. The large companies targeted in megadeals are typically more resilient in the face of macroeconomic turbulence and are led by experienced management teams that are more skilled at navigating uncertainty.

"But all of that is magnified in the middle market when you're dealing with smaller acquisitions, smaller companies that could be rocked by the uncertainty [and] by the tariffs," Mufson said.

Rebuilding confidence was a theme across the second-quarter earnings calls by private equity's Big Four — the four largest publicly traded alternative asset managers by assets under management.

Apollo Global Management Inc. barreled ahead in the second quarter, deploying a firm record $90 billion even after President Donald Trump's April 2 Liberation Day tariff announcement rattled M&A markets.

Blackstone Inc. CEO Stephen Schwarzman said tariff uncertainty was already starting to subside, setting the stage for more deal activity. KKR & Co. Inc. co-CEO Scott Nuttall and The Carlyle Group Inc. CEO Harvey Schwartz both said perceptions of a troubled private equity industry do not line up with their realities.

"On any given day, you could see a lot of noise in the marketplace, but the marketplace feels pretty friendly at the moment," Schwartz said.