USA – MARYLAND Trends and Developments Contributed by: Michael Hardy, Joseph Machi, Nicholas Stewart and Leen Al-Alami, Duane Morris LLP
be replicated in 2025. In Q1 2025, the US mid-market sector, which recorded USD29.6 billion in total exit value, saw a 14.3% quarter-over-quarter decline in exit value. There are two opposing outcomes that the industry could see in terms of exits in the remainder of 2025. On the one hand, the economic and geopolitical cli - mate may incentivise private equity firms to continue to extend holding periods, suffer a backlog of held investments and explore alternative exit options. The median holding period currently stands at around six years, up from a median of just over four years in 2020. Over half of approximately 30,000 unsold investments, worth USD1.8 trillion in the aggregate, have been held by private equity firms for at least four years. On the other hand, some analysts predict that, based on historical patterns, holding periods are at a peak and the industry will see increased exit activity in late 2025 into 2026. Strategically, the industry-wide back - log could also compel some firms considering a late- year exit to prepare for an exit sooner in order to avoid a landscape overridden with exit candidates. Indeed, some reports indicate that, for the first time, some fund GPs have been prioritising an earlier full exit over further extending a holding period for a potentially incrementally greater return. In a poll conducted by the ILPA, 63% of participating investors responded that they preferred a “conventional exit” over a partial or minority exit, “even accepting a valuation below recent marks if necessary”. IPOs The second half of 2025 is also expected to see a marked increase in PE-backed companies’ initial pub - lic offerings. Although IPOs are not the traditional exit route for private equity funds, they are increasingly viewed as an alternative exit path for private equity- backed companies in industries such as technology, healthcare and consumer brands. While certain antici - pated IPOs stalled in the second quarter of the year due to the volatility of public markets and uncertainty in tariff structures, a mid-year report showed a small increase in deal volume compared to the same period last year and a 17% increase in total deal value for private equity. Sources estimate that private equity
holdings account for about 50% of the approximately 200 companies that are technically ready to go public but have not yet publicly announced plans to do so. Secondaries One alternative exit route private equity investors con - tinue to look to as an answer to limited exit options and the illiquid nature of private equity as an asset class is secondaries. In 2024, secondary deal vol - ume reached an all-time high, with USD162 billion in deal volume. The momentum is expected to continue through 2025. Analysts project an aggregate volume of USD185 billion for the year. The benefit to a secondary buyer in these transactions is a lower-risk investment, potentially at a discount, in an existing, mature portfolio, with the potential for cash flow sooner than would be expected in a primary fund investment. For a secondary seller, the boom in the secondaries market could mean that even if the seller is divesting its stake at a discount to net asset value, it could still make more than its initial invest - ment up until the time of the secondary sale. Although secondary transactions are expected to continue to grow, they cannot yet provide an answer to funds’ liquidity crunch, as they amount to less than 5% of private equity assets under management glob - ally, according to Bain & Company. Minority transactions 2025 is expected to see growth in minority-stake transactions. In this type of transaction, rather than a traditional buyout, a fund acquires only a non-control - ling minority interest in a target business. Over the past two years, private equity funds have looked to minority-stake transactions as a way to diversify their asset classes and investment strate - gies in an environment where capital is expensive, markets are uncertain and investors are cautious. Over 2024, US minority deal value climbed 53.5% to reach USD248.9 billion. Deal volumes remained stable year on year, with approximately 3,100 transactions in each of 2023 and 2024. As of mid-June of the cur - rent year, minority deal value had grown by 61% year on year to USD169 billion, although that figure may be inflated by the USD40 billion minority investment
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