After years of record fundraising and frothy valuations, the European private equity market enters 2025 in a more sober — but arguably more interesting — phase. While deal flow has slowed, competition for high-quality assets remains fierce. Regulatory frameworks are evolving, LP expectations are rising, and the playbook that worked in 2018 no longer guarantees success today.

At Alioth Capital, we believe this is a time not for retreat, but for recalibration. In this post, we take stock of where the European PE market stands, where it's headed, and how GPs and LPs alike can adapt to an environment defined less by abundance, and more by strategy.

A Market in Transition

The data tell a clear story: private equity fundraising across Europe has decelerated. Institutional investors are tightening allocations, often reserving capital for established managers or diversifying through secondaries. At the same time, many GPs are holding assets longer than expected, either due to subdued exit environments or delayed value realization.

This slowdown is not a crisis. It’s a normalization — and perhaps a welcome one. Valuations are returning to more rational levels, operational value creation is back in focus, and investors are re-evaluating risk with a sharper lens.

Emerging Themes Reshaping the Industry

Sector Rotation

Capital is shifting toward resilient sectors. Infrastructure, renewables, and healthcare are leading the charge, while more cyclical industries like retail or non-tech manufacturing face headwinds. Within tech, there is renewed interest in profitable, capital-light businesses over pure growth plays.

Minority Deals and Structured Equity

Full buyouts are increasingly complemented — or replaced — by structured equity, growth capital, or minority stakes. This reflects both a desire for flexibility and a response to sellers' price expectations, which still lag the reset.

Family Offices on the Rise

Single-family offices and ultra-high-net-worth individuals are bypassing traditional fund structures and going direct. They seek bespoke deals, longer holding periods, and greater alignment — an environment where independent advisors can play a crucial role.

Regulation and Complexity

Regulatory changes across the continent are reshaping how funds operate. AIFMD II imposes greater transparency and reporting burdens. ESG disclosures under SFDR are no longer optional — they are a competitive necessity. Meanwhile, tax structuring across jurisdictions has become more intricate, particularly in cross-border transactions involving southern Europe.

Antitrust scrutiny is also intensifying. In markets like France and Germany, even mid-cap deals are drawing regulatory attention, adding months — and cost — to execution timelines.

What to Expect Looking Ahead

We anticipate several trends to define the next 12 to 18 months:

  • Return of mid-cap and special situations strategies, particularly in countries like Italy and Spain.
  • Fund consolidation, as smaller platforms struggle with scale and compliance.
  • Cross-border M&A, as firms look to unlock synergies in an otherwise fragmented European market.
  • Technology enablement, with deal origination, due diligence, and portfolio monitoring increasingly supported by AI and data tools.

The Alioth Perspective

At Alioth Capital, we work alongside both GPs and LPs to help them navigate this changing landscape with clarity and purpose. Independent advisory brings objectivity and precision at a time when every investment decision carries more weight.

In a market that rewards readiness and discipline over speed and scale, we believe those who take the time to rethink their strategy — from deal sourcing to value creation to exit — will be the ones who outperform in the years ahead.