Europe’s Private Equity: Dry Powder Soars but Fundraising & Exits Stall

While the full text of IPE’s “Time for more European private equity?” article is behind a paywall, related recent market data and reports allow us to extract the broader picture: European private equity is at a tipping point—armed with capital and compelling value propositions, yet constrained by persistent structural headwinds.

According to Invest Europe, as of 2024, European private equity and venture capital had €1.25 trillion in assets under management, including a record €414 billion in dry powder—capital committed but undeployed. Buyout funds represent the lion’s share of both AUM and dry powder, with venture funds growing their share steadily. Pension funds remain the largest LP contributor to dry powder, reflecting increasing institutional commitment.

However, fundraising is softening. After a record of €142.1 billion raised in 2024 by European PE funds, projections for full-year 2025 suggest a decline to approximately €88–110 billion—a fall of ~23–33% compared to the prior year. The void is being filled by a consolidation: the top 10 largest funds now capture a disproportionately large share of capital, while first-time managers struggle.

On the deals front, 2024 posted strong momentum: European private equity deal volume ranged between €550–€575 billion, up about 25–27% over 2023. Through Q3–Q4 2025, monthly and quarterly data indicate year-to-date deal values modestly ahead of or slightly behind 2024 depending on region—but expectations are for recovery into late 2025 and 2026 as financing becomes less costly and valuations compress toward seller and buyer consensus. Add-ons continue to dominate count-wise, suggesting that many PE firms are expanding existing platforms rather than pursuing major platform acquisitions.

Exits are a point of concern. The backlog of portfolio companies is growing, and exits—via IPOs especially—are subdued, due to mismatches between seller pricing expectations and buyer appetite, as well as macroeconomic and geopolitical uncertainties. Firms are increasingly turning to secondary buyouts, recapitalisations (including continuation vehicles), and partial exits to bring liquidity to LPs. Holding periods are creeping upward: median exit durations are for example 5.7 years in 2024 vs ~4.7 in 2020.

Regulatory and structural complexities remain key constraints. European PE faces a disjointed regulatory framework across jurisdictions that raises compliance and operational costs. Pension systems across many member states are underdeveloped in terms of funded, cross-border vehicles, contributing to a lag in institutional capital flows and interrupting domestic savings mobilisation for PE investment. New rules such as AIFMD II are altering liquidity, governance, and risk retention requirements, particularly in infrastructure-focused funds, which directly affect capital deployment strategies.

Strategically, the opportunity exists in focused sectors—tech, healthcare, renewables—where Europe has competitive strengths and tailwinds from public policy (e.g., infrastructure stimulus in Germany and EU-wide competitiveness reforms). Smaller buyouts and specialization enable relative valuation advantages versus U.S. peers, and new fund structures (evergreen ELTIFs, semi-liquid vehicles) are being adopted to attract retail or semi-institutional capital. LPs diversifying strategies away from public markets—or lifting allocations to PE to meet return targets—are likely to favor funds with strong operational capabilities, sector expertise, regulatory agility and exit pathways.

Open questions to monitor:

• Will Europe’s exit markets—especially IPOs—revive sufficiently to allow traditional return pathways?
• How much can regulatory reforms—both in pensions and cross-border capital markets—accelerate over the next 1–2 years?
• Can smaller GPs break through in a market increasingly dominated by large managers? What are the implications for fees and LP bargaining power?
• How will macro risks—interest rates, geopolitical instability, energy and trade disruptions—affect deal pricing, leverage availability, and target quality?