• 🟣 High interest rates and inflation. As McKinsey notes, a dramatic rise (500 bps in the U.S.) shook the industry in 2022–23, prompting many buyers to step back mckinsey.com.
  Higher financing costs and record deal multiples made levered buyouts challenging in the past two years. Only as inflation moderates are central banks “easing off” on rate hikes bain.com,
  but many GPs still face costly debt markets.
• 🟣 Policy and trade uncertainty. Global turmoil, from U.S., China trade friction to European and U.S. elections, has kept investors on edge. As Bain observes, early-2025 deal volumes were muted partly because investors “are looking for clarity amid back-and-forth signals regarding tariffs and other macro issues bain.com.
  In the U.S., impending regulatory shifts add to the wait-and-see stance.
• 🟣 Prolonged hold periods. With M&A down in 2022–24, exit routes dried up. EY reports that the PE industry now holds over $4 trillion in portfolio assets — 40% of them held beyond four years ey.com.
  Many firms simply held investments longer rather than sell into a weak market. This exit drought has strained LP cash flows, causing investors to slow new commitments. Reuters highlights that globally buyout funds “called $130 billion more from their investors than they returned” between 2022 and early 2024 reuters.com  an unsustainable gap that reflects the distribution shortage.

🟣 Investor caution and fund-raising drag. Limited partners remain selective, favoring only top-tier firms with strong track records. Bain reports that after feeding deal-making in 2021, LPs sharply cut back on new allocations as exit proceeds slowed bain.com.
Buyout fund-raising fell sharply: Bain finds buyout funds raised 23% less capital in 2024 than in 2023 bain.com (North America was down 34%). GPs face mounting pressure to show distributions,  over half of GPs say they feel high pressure from investors on exits
reuters.com.