The global private equity ( PE ) landscape regained momentum in 2025 as investor sentiment improved markedly in the second half of the year, helping to lift deal activity and setting the stage for more consistent capital deployment in 2026, according to a recent report.

Global general partners ( GPs ), buoyed by a gradually reopening initial public offering ( IPO ) window and increasing confidence in GP-led secondary solutions, are now repositioning for a more active exit environment, finds international law firm Morrison Foerster ( MoFo )’s Global PE Trends 2025 and Outlook for 2026 report.

Despite lingering geopolitical uncertainty and evolving regulatory frameworks, PE activity in 2025 proved resilient, particularly in the large-cap strategic space. While overall deal volumes remained below pre-pandemic highs, high-value transactions helped prop up total deal value, reflecting continued appetite for premium assets.

Technology remained the dominant sector, especially in artificial intelligence ( AI ) and data infrastructure, while life sciences and healthcare held steady across select geographies. Regulatory considerations – ranging from tariffs to heightened antitrust scrutiny – continued to shape the dynamics of cross-border dealmaking.

Looking into 2026, the report anticipates a shift from opportunistic plays to disciplined, long-term capital deployment. Sponsors are expected to make broader use of continuation funds and tailored liquidity tools to extract value from longer hold periods and navigate a still-evolving exit landscape.

Sustainability sensitivity

Pushback against terms like ESG ( environmental, social and governance ) and DEI ( diversity, equity and inclusion ), according to the report, is expected to continue into 2026. These acronyms have become politically charged, especially in some Western markets.

However, PE firms are not expected to lose interest in sustainability issues. Even if the labels fall out of favour, most PE firms still recognize that paying attention to environmental and social risks, as well as strong governance, can lead to better long-term performance.

What’s more, many countries are rolling out stricter rules for how companies report and manage sustainability-related risks. As these legal and regulatory standards take hold, they may outweigh any hesitation investors have about using the terms.

Crucially, a strategic pivot is under way. In a world that’s increasingly multipolar, PE firms are prioritizing certainty, flexibility and, above all, growth. And that search for growth is pushing the PE spotlight decisively towards Asia.

Asia ascending

Asia is now firmly positioned at the heart of the next phase of global PE expansion. Japan and India, according to the report, are emerging as standout destinations for inbound capital.

Japan is expected to see a rise in mid- and large-cap transactions, supported by corporate governance reforms, macroeconomic stability and a growing pipeline of take-private opportunities.

However, the outlook may be further shaped by the country’s political calendar as Prime Minister Sanae Takaichi has recently signalled the possibility of a snap election. As of mid-January 2026, no official announcement has been made, but political insiders expect the lower house to be dissolved soon, with elections likely in early February.

India, meanwhile, continues to deliver on its promise as a scale market. Its combination of strong macro fundamentals, demographic tailwinds and tech-driven enterprise growth makes it a magnet for global GPs seeking long-term upside.

China, which has experienced a subdued period of PE activity in recent years, may be turning a corner. In 2026, the MoFo report says, China’s PE market is expected to see a gradual recovery, supported by stabilizing macro conditions, selective policy easing and improving investor sentiment.

Domestic and regional capital, particularly renminbi funds, state-backed vehicles, and local GPs, will drive deal activity, focusing on national priority sectors like semiconductors, AI, renewables and the upgrading of consumer markets.

Compressed valuations are said to be creating attractive buying opportunities for regional and China-focused funds, while a stronger IPO outlook in Hong Kong and signs of increased liquidity suggest a modest rebound in exits may be on the horizon.

Diversification from Western markets

Southeast Asia. Meanwhile, offers both opportunity and complexity for PE investors. Technology and digital transformation, the report highlights, will continue to be growth catalysts, driven by rapid adoption of digital services and data infrastructure investment.

Healthcare – spanning medtech, health services and digital health platforms – is also expected to sustain robust interest, reflecting evolving demographic needs and higher government expenditure. Secondary buyouts and continuation funds are becoming increasingly relevant as flexible exit routes in markets where traditional IPOs and trade sales remain selective.

That said, geopolitical neutrality, a comparative advantage for many Southeast Asian economies, coexists with regulatory and national security scrutiny that can add complexity to cross‑border deals. Navigating these nuances will require sponsors with deep local expertise and the ability to work across diverse regulatory frameworks.

This expected pivot is anchored in three dynamics: the diversification needs of international investors seeking exposure beyond Western markets, renewed confidence among regional and domestic institutional players, and early signs of policy stabilization aimed at supporting strategic sectors, such as semiconductors, AI, renewables and consumer‑oriented businesses.

Importantly, the interplay of domestic capital and Middle Eastern co‑investment, as well as an improving IPO backdrop in Hong Kong, contributes to a more positive sentiment for exits and dealmaking.

Together, these developments, the MoFo report highlights, points to a structural shift. Asia is no longer just a diversification play, it is now viewed as a core growth engine for global PE in 2026 and beyond.