For the past three years, exit scarcity has been the defining constraint in private equity. The higher interest rate regime that began in 2022 forced a swift reset in valuations, as public markets grew highly selective and both strategic buyers and financial sponsors pulled back.
Liquidity channels narrowed accordingly, pushing distributions as a share of NAV to their lowest levels since the global financial crisis. In response, tools once considered niche — tender offers, continuation vehicles, and NAV loans — have moved into the mainstream as core mechanisms for managing liquidity.
Entering 2026, the private equity exit environment is showing early signs of renewal. M&A activity, IPOs and sponsor-to-sponsor transactions have all staged meaningful recoveries. Still, progress to date falls short of restoring liquidity at the scale required to unwind the sizable backlog the asset class has accumulated. Here we unpack key themes defining the private equity exit landscape.
In 2025, a reopened IPO market and narrowing bid-ask spreads in sponsor-to-sponsor transactions enabled private equity to build on its recovery from 2024, marking the second-largest year on record by exit value. Globally, private equity exits reached approximately $1.3 trillion, trailing only the 2021 peak of $1.7 trillion. After a stop-and-start year punctuated by Trump’s “Liberation Day” tariffs and a US government shutdown, exit activity surged in the fourth quarter, achieving the strongest quarterly exit numbers since 2021 and setting a supportive tone heading into 2026.
Venture liquidity also showed signs of improvement, with exit values surpassing those of the previous three years, aided in part by a growing willingness among investors to accept down-round public listings as a viable path to liquidity. Marquee VC names that hit the street this year include the likes of Figma, CoreWeave, Circle, and Gemini.
Notably, secondaries accounted for a far larger share of recent IPOs than is typical. In Figma’s listing, for example, just 33% of the shares sold were newly issued by the company, while Klarna’s IPO saw new shares account for only 15% of the total. By contrast, across VC-backed IPOs between 1990 and September 2025 an average of 91.5% of shares were primary issuance. The skew in this year’s offerings underscores how recent IPOs have been driven less by capital raising and more by the need to relieve venture capital’s prolonged liquidity squeeze.
More broadly, secondaries continued to play a fundamental role in supplementing organic exit avenues, providing a non-trivial release valve for the industry’s distribution dilemma. In private equity, continuation fund–related exits reached a record high by deal count, while venture secondaries — largely through direct transactions — proved to be a significant source of liquidity.
Ultimately, 2026 is beginning with optimism that companies are once again finding viable paths to realizations. That said, the overhang from the 2021–2022 vintages continues to weigh heavily on the industry, creating a significant fault line for liquidity progress at scale. Despite exit values surpassing pre-pandemic norms, they are only gradually eroding the swollen denominator created by years of heavy deployment. According to PitchBook, private equity-backed companies acquired in 2021 are exiting at a notably slower pace than prior vintages. At the current clip, they estimate that only about half of the 2021 cohort would be realized by the 10-year fund mark.
Therefore, liquidity remains a central concern for the industry heading into 2026. Buyout funds still hold roughly 30,000 portfolio companies, valued at around $3 trillion. Exits would need to accelerate far beyond historical norms to meaningfully reduce this backlog. Even so, the recovery is expected to gather momentum over the year, shaped by a set of distinct trends that will determine how and where liquidity ultimately emerges.
The IPO window is expected to open wider in 2026, building on the momentum seen this year. Companies reportedly mulling S-1s include OpenAI, Anthropic, and Databricks, among others. Most eye-catching is the rumored flotation of SpaceX, which could command a valuation of around $1.5 trillion. If several trillion-dollar listings were to reach the market, 2026 could represent the largest wave of IPO exit value on record and generate significant distributions. Notably, SpaceX, Anthropic, and Databricks alone could result in roughly $700 billion back to LPs.
This year’s expected cohort of offerings will likely fall under mega trends described above, such as AI and defense. These are capital-intensive businesses, suggesting a shift away from secondary-heavy listings that defined 2025 and towards fresh capital raises. SpaceX’s highly-anticipated flotation, for instance, is widely reported to be intended, in part, to finance Elon Musk’s ambitions to build data center infrastructure in space.
However, listing standards also show little sign of easing, adding complexity to the IPO environment. Companies coming to market today are typically clear category leaders with strong unit economics. Passing the Rule of 40 has become table stakes, and significant scale is required. Many names that debuted in 2025 posted hundreds of millions of dollars in revenue, alongside profitability or a clear path to it. For example, 2025’s batch of B2B IPOs roughly averaged 50% growth at $500M ARR.
Navan’s IPO offers a clear illustration of how exacting public markets remain. Despite generating $613M in revenue and delivering 32% growth, the company’s neutral Rule of 40 score (0) appears to have driven an immediate 20% markdown, with its valuation falling from 10x to 7x revenue in its market debut.
A business with comparable fundamentals would likely have commanded a multiple north of 20x in 2021, underscoring how sharply market expectations have reset. While the IPO window is technically “open,” it’s only letting in companies with the strongest balance sheets. Only a small crop of the current unicorn herd can meet these stringent underwriting standards, making a broad-based reopening of the market unlikely.
Moreover, while IPO activity has picked up, post-listing performance has been underwhelming and marked by volatility. Despite early pops and sharp initial increases, most venture-backed listings finished the year flat or below their offer prices. Sustained performance in the public markets will be essential to restoring confidence, and the performance of early 2026 IPOs will be closely watched as a barometer for follow-on listings.
Further, while venture-backed IPOs may command the headlines, traditional private equity-backed listings staged a comeback in 2025, highlighted by Venture Global and Medline. Medline’s strong initial performance, specifically, signals encouraging momentum for 2026 PE listings.
Whether sponsors can successfully exit the wave of software and technology companies taken private during 2022 and 2023 will also be a key focus this year. The investment thesis behind this wave of listings was to reassert the Rule of 40 for assets shaped in the era of zero interest rates. SailPoint’s flotation this year offered an early test. Despite posting a Rule of 44 at listing, more than $600M in revenue, and 25% growth, the stock’s market performance has been subdued.
“Record-breaking” has become a familiar refrain in the secondaries market, and 2025 was no exception. Transaction volumes surpassed $200 billion, setting a new high-water mark for the industry. Even as distributions begin to recover, traditional exit routes remain insufficient to absorb the vast stock of assets held across private capital portfolios.
Both LP- and GP-led transactions will play a central role in bridging that gap. This year could mark another year of record activity, supported by broader adoption across asset classes and persistent liquidity pressures. However, enhanced capitalization will be needed to sustain current transaction levels.
The structural shift toward a “private for longer” model, however, is the most significant force lifting secondaries activity. While assets acquired during the ZIRP era that need more time to reach targeted multiples have accelerated demand, the broader appeal runs deeper. Sponsors, management teams, and founders increasingly prefer to extend growth journeys in the private markets.
Additionally, revenue growth is expected to drive an even greater share of private equity returns. in the years ahead, but driving growth takes time. As a result, managers are more inclined to hold their strongest assets longer to fully execute value creation plans. At the same time, in an environment of heightened selectivity, the appeal of continuing to compound value in top-performing companies only amplifies.
Continuation funds have emerged as a vehicle to facilitate that compounding, while providing exit optionality. As with most financial innovations, (subscription lines offer a useful parallel) skepticism has certainly followed. However, market standards, including independent valuations, significant general partner capital commitments, and other governance measures are solidifying that should broaden institutional acceptance. Coller Capital even predicts a rise in “continuation funds of continuation funds” throughout 2026, as sponsors seek to extend holding periods further and attractive risk-adjusted returns from recent vintages start to crystallize.
Beyond buyouts, the trend is even more pronounced in venture capital. The average time to IPO has climbed to a record 14 years, and capital has concentrated in large funds capable of underwriting later-stage investments in mature private companies, allowing them to remain private as they scale. One of the clearest takeaways from 2025 is that tender offers and secondaries have moved firmly into the mainstream, becoming liquidity tools for founders and early investors. That model is set to persist and spread well beyond a handful of household-name companies.
Ultimately, while exits are recovering, the industry’s liquidity woes are not fully healed. Moving into 2026, it’s likely that organic exit avenues will continue to build on the momentum from 2025. That said, there are factors that could upset the constructive outlook for exits discussed here. For one, initial exuberance for AI does show signs of discernment, and any abrupt repricing in public markets could certainly chill the IPO pipeline. Further, secondaries will remain essential to helping the industry work through its accumulated inventory of assets. As these transactions become more institutionalized, their adoption is likely to broaden further, reinforcing their role in the private equity liquidity toolkit.
Explore our Secondaries Report for key trends defining the secondaries landscape, including asset class expansion, the impact of evergreen capital on transaction pricing, and continuation fund best practices.
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