Private equity firms facing a suppressed deal and exit market can no longer rely on multiple expansion to carry returns. The evidence points to three distinct, evidence-based responses: operational value creation inside portfolio companies, add-on acquisitions priced at lower EBITDA multiples, and alternative liquidity through continuation vehicles and secondaries. PwC's US private equity team, reviewing first-half 2026 conditions, argues that sponsors who adapt will emerge stronger, while those waiting for the cycle to revert "may find that it never does."
Key Market Shifts Reshaping Private Equity Strategies
PwC's midyear 2026 US private equity outlook documents a market that is not uniformly slow but selectively rewarding. Deal volume in the first half of 2026 declined 34%, while average deal size rose nearly four times compared with the same period of 2025, as capital concentrated in higher-conviction bets. Exit activity remains suppressed, and fundraising has bifurcated sharply: top performers on realized returns raised quickly, while others struggled to reach a first close.
The most consequential shift is metric-driven. Distributions to Paid-In Capital has become the defining fundraising metric of 2026, displacing internal rate of return as the number limited partners watch most closely. LPs are demanding realized returns over paper marks. This is a response to prolonged hold periods and scarce exits rather than a disregard for long-term appreciation—but it changes which strategies matter. Approaches that generate cash flow or unlock liquidity now carry more weight than those that depend on valuation marks.
