This is to be expected, albeit only slowly. Financial investors have found it rather difficult to take companies public in recent years for various reasons – first and foremost due to price-suppressing economic weakness and very volatile market sentiment. We at Sidley Austin assume that the situation will improve this year, and that the traffic light for the IPO market will switch to green more often.

Partly because the efficient price function of public markets is reaching an equilibrium where investors increasingly see themselves in a position to move towards an IPO of successful portfolio companies. Private capital, on the other hand, will certainly remain needed, as not every stage of a company's development or every sector is equally suitable for an IPO.

The pressure is significant. Private equity fund investors, fuelled by the expiry of the usual recycling cycles, have increasingly pushed for capital returns in recent years. In times of lean or unattractively priced exit opportunities, private equity investors have also become very innovative, for example through so-called „continuation funds“, „net asset value“ loans or „fund secondaries“. Nevertheless, these creative ideas were, and are still, only ever seen as temporary solutions.

The real business of private equity (PE) – with a few exceptions such as the trend towards „permanent capital“ with a much longer-term investment horizon – is to buy companies and sell them again at a profit after a few years of optimisation. Now that the market situation is improving, PEs will return to this business with vigour.

We expect a higher density of M&A deals in 2025 compared to 2024, with signs pointing to M&A activity reaching its norm this year. This upturn can be felt in both the UK and continental European markets.

Transactions that would have fizzled out a year or two ago are picking up speed again. As the financial markets are increasingly open again to M&A financing, which is fundamental to the PE industry, in view of slowly falling key interest rates, and valuation horizons are normalising, there is a palpable sense of optimism.

Not to the detriment of London. Despite all the prophecies of doom, London continues to assert itself as the centre of the PE world in Europe. Neither Brexit, nor the UK's change of government, nor the hotly debated first UK budget after the change of government in 2024, which was feared to be the nail in the coffin for the incentive structure of PE remuneration, have led to any significant change so far.

International transactions with a European focus – and in some cases beyond – continue to be largely managed from London. This applies to both the investor side and the advisors. There are numerous reasons for this.

One key aspect is certainly that the complex transactions of the PE players are rarely purely national, and London is therefore ideally suited as an overarching base for coordination. In addition, many PE funds have their roots in the United States. London, which is often culturally closer to the USA than continental Europe, is therefore the ideal gateway for sowing the seeds of US capital in the greater European area.