Private equity fatigue: What slumping fundraising and frozen exits mean for SME owners in 2025
Global private equity fundraising has plunged to its lowest level in seven years, trending at just US$592 billion over the 12 months to June. This is a stark signal of market fatigue, even as GPs entice LPs with unprecedented fee cuts and discounts. Concurrently, MSA’s latest update flags a rotation of capital into hedge funds and digital assets, as investors seek agile, liquid, and transparent alternatives.
For SME business owners planning exits or growth, this is a pivotal moment. It is not a time for panic, but for recalibration. At Morgan Shaw Advisory, we advocate using this turbulence strategically by focusing on business fundamentals, clarity, and preparedness. With our EBITDA+ SIX STEPS TO SUCCESS™ framework, we help business owners build strength through uncertainty, from cleanliness in financials to exit readiness and valuation resilience.
Why this matters now
Fundraising fell 35% year on year in Q1 2025, while LPs shifted capital toward more liquid and adaptable investment vehicles. The broader fundraising decline aligns with the US$592 billion trough through June.
Who should care?
SME owners preparing for exit or capital raise
Founders and acquirers navigating a seller’s chill
Strategic buyers and alternative financiers reviewing opportunity amid value dispersion
The fatigue factor: When incentives aren’t enough
Private equity firms are slashing fees, offering early-bird discounts, and even returning transaction fees. Yet LPs remain cautious. Fundraising is nearly one-third off its 2021 high, driven by high interest rates, a muted deal pipeline, and exit hesitations.
Capital is re-routing
Investors are increasingly choosing more agile options. Hedge funds are seeing the largest quarterly inflows in over a decade. Digital assets have drawn US$60 billion year to date, buoyed by clearer U.S. regulation and new spot ETFs.
SME reverberations
In this environment, SMEs face delayed exits, tougher valuations, and heightened scrutiny: not just on earnings but on transparency, governance, and operational durability. Preparedness is no longer optional, it is the competitive advantage.
Actionable takeaways
Pause, don’t panic: Understand that private equity is not inaccessible, but it expects readiness and realism.
Prioritise transparency: Clean, verifiable data and governance matter more than ever.
Consider alternatives seriously: Strategic acquirers, private credit, or co-investments may provide stronger paths.
Prepare early, exit late: The best exits are often forged over 12–24 months of disciplined planning.
Stress-test your valuation: Model scenarios with 5–20% discounts to guide decisions.
If you are an SME owner concerned that the private equity slowdown is impacting your exit or growth plans, let MSA help you chart a clear path forward. Book a confidential consultation or explore our latest insights, including Is Private Equity Fatiguing? and M&A trends in Australia, available at our MSA Resources page, to start building resilient value today.