USA Trends and Developments Contributed by: Yana M. Mereminsky, Ramya S. Tiller, Erik J. Andrén and Vadim Avdeychik, Debevoise & Plimpton LLP
– although less than ideal – may be acceptable to a seller if the alternative is a buyer closing condition tied to portfolio deterioration. M&A US private equity M&A began the year poised to extend the strong recovery seen in 2024. Sponsors continued to hold significant dry powder, credit con - ditions were improving, there were hopes for a new administration’s more favourable regulatory environ - ment, and there were a large number of portfolio com - panies held for five-plus years and ripe for sale. But 2025 got off to a slower start than expected, with US private equity M&A deal volume down approximate - ly 15% compared to the first half of 2024 and 17% compared to the second half of 2024. At the same time, however, total deal value was up 16% and 6% compared to those two periods, respectively. Further, a recent increase in activity levels is expected to con - tinue into late summer and early fall. The authors thus remain cautiously optimistic for the year’s second half. The announcement in April by the Trump adminis - tration regarding tariffs led to significant volatility in public markets and uncertainty regarding future trade policy, leading to valuation gaps between buyers and sellers. Nonetheless, the first half of 2025 saw some significant transactions, including Sycamore Partners’ USD10 billion take-private of Walgreens Boots Alli - ance, and sponsors’ pursuit of take-private transac - tions now appears to be on the rise. Although the mar - ket as a whole is trading near all-time highs following a quick bounce-back from April’s lows, not all stocks have participated as vigorously in the rebound – or the gains of 2023 and 2024 – providing selective oppor - tunities for sponsors. This spring also brought about changes to the Dela - ware General Corporation Law relevant to US private equity clients considering a take private, addressing conflicted and controller transactions. These changes provide sponsors with greater clarity on whether they will be subject to the more stringent “entire fairness review” in connection with a take-private transaction when the sponsor already owns a stake in the pub - lic company (and creates a safe harbour from being deemed a “controller” for anyone holding less than a third of the voting stock).
The normalisation and renewed optimism in take-pri - vates have also been carrying over to the private side as the mid-year mark passes. Add-ons and carve- outs continue to represent a substantial portion of activity, with growth in new platform investments trailing expectations somewhat despite improved credit conditions and a need of sponsors to realise vintage investments. However, a lower frequency of sponsor-to-sponsor exits (and other traditional exits) have cemented the importance of continuation fund transactions as a core liquidity path for sponsors, and with capital allocation increasing for continuation fund specific strategies, this transaction type is expected to continue to grow and mature. Macro risks are ever-present, but the US private equity M&A market is expected to be well positioned for the remainder of the year, with sponsors having ample capital to deploy opportunistically and to support existing portfolio companies in add-on transactions. Credit markets have also shown resilience in the face of recent geopolitical events, remaining active without significant worsening of terms for sponsors. Overall, activity is expected to remain strong through the summer, picking up further in September and into autumn. Leveraged Finance Financing market participants, hoping to build off of 2024’s record-setting issuance, were optimistic com - ing into 2025 but debt markets were tepid in the first half of the year. Loan market issuances for the first half of 2025 were down 20% compared to the first half of 2024, according to PitchBook LCD; this decreased activity was most clearly seen in Q2 2025, which fea - tured just USD105 billion of loan issuances compared to USD354 billion in Q1 2025 and USD404 billion in Q2 2024. Fortunately, activity in the beginning of Q3 2025 has signalled that the anticipated optimism heading into the year may be realised in the second half of 2025. The first-half slowdown in 2025 can be attributed to three interwoven factors. First, macro-economic uncertainty from recent political events, particularly the tariffs imposed by the Trump administration, con - tributed to the lull in overall deal activity. Many debt
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