Private capital markets continue to adjust to a macroeconomic environment that looks markedly different from the decade that preceded it. Higher base rates have altered the underwriting assumptions behind leveraged transactions, and the fundraising environment has become more selective, with investors concentrating commitments among a smaller number of managers with established track records.

This has had a visible effect on deal activity. Sponsors are holding assets for longer, and exit processes are increasingly structured to accommodate a wider range of potential outcomes, including continuation vehicles and partial realisations, rather than assuming a straightforward trade sale or IPO. Financing structures have also evolved, with private credit continuing to take share from traditional syndicated lending in the mid-market.

For managers, the practical implication is a need for greater flexibility in fund and transaction documentation, allowing for a broader set of exit and financing routes than may have been contemplated when funds were originally raised. We are advising an increasing number of clients on the amendments needed to accommodate this shift.