Navigating the Storm: Bain’s Guide to Navigating Tariff Turbulence & Liquidity Crisis | NeoForm

According to Bain Private Equity Report 2025 the first half year was a masterclass in volatility for the industry. Just as the market was building on the recovery momentum of 2024, a new wave of geopolitical and trade uncertainty hit, reshaping the landscape overnight.

Bain & Company’s seminal midyear report, “Leaning Into the Turbulence,” provides a crucial roadmap for this new reality. At NeoForm, we’ve distilled its key insights to help general partners (GPs) and limited partners (LPs) not just navigate the chaos, but identify the significant opportunities hidden within it.

The Great Deceleration: From Q1 Optimism to Q2 Uncertainty

The year began with undeniable strength. Buoyed by open credit markets, easing inflation, and declining interest rates, Q1 global buyout deal value reached its highest point since 2022. Mega-deals like Sycamore Partners’ $23.7 billion take-private of Walgreens Boots Alliance signaled deep confidence.

This optimism was short-lived. The catalyst? The tariff policy announcements of April 2nd. Almost instantly, long-term investment models were thrown into question. The data reveals a stark contrast:

• Deal-making Slowdown: The value of deals announced in April fell 24% below the Q1 monthly average.
• Exit Freeze: The most immediate impact was on the IPO channel, which “essentially shut.” High-profile offerings, like Swedish fintech giant Klarna’s planned U.S. IPO, were paused indefinitely.
• The Domino Effect: This uncertainty doesn’t just affect direct targets. It creates a “wait-and-see” mentality across the entire ecosystem, from strategic acquirers to debt providers.

The Liquidity Crisis Reaches a Boiling Point

Beyond the headline deal slowdown lies the report’s most urgent theme: a severe and growing liquidity crisis.

The math is sobering for LPs:

• The DPI Shortfall: For funds raised in 2018, the median Distributed to Paid-In (DPI) capital ratio is languishing at just 0.6x. Historically, it should be closer to 0.8x by this stage. This means LPs are getting significantly less cash back, impairing their ability to reinvest and rebalance their portfolios.
• LP Sentiment Shifts: Bain’s poll with the Institutional Limited Partners Association (ILPA) is telling. A overwhelming 63% of LPs now prefer a conventional exit at a lower valuation over alternatives like dividend recaps or continuation vehicles. They want realizations, not financial engineering.
• The Secondaries Surge: Frustrated by the slow pace of distributions, LPs are taking liquidity into their own hands through the secondaries market. High-profile examples like the $5 billion secondary sale by New York City pension systems (reportedly bought by Blackstone) and Yale University exploring sales underscore this trend. However, this market is still too small (<5% of global AUM) to solve the industry’s systemic liquidity problem.

Fund-Raising: An Unprecedented Challenge

The inability to return capital is creating a vicious cycle for GPs trying to raise new funds.

• The Mega-Fund Drought: For the first time in a decade, not a single buyout fund larger than $5 billion closed in Q1. This highlights a dramatic decline in both the average fund size and the number of funds closing.
• A Massive Supply-Demand Imbalance: A staggering 18,000+ funds are currently on the road, seeking $3.3 trillion. There is only about $1 of supply for every $3 of demand, making it an intensely competitive environment for any GP without a stellar track record.
• Geographic Reallocation: Macro concerns are causing LPs to rethink geographic exposure. While the U.S. remains the dominant market, the report notes that a significant portion of Canadian and European LPs expect to shift allocations from the U.S. to Europe in response to trade tensions.

The NeoForm Take: How to Lean Into the Turbulence and Win

Bain private equity report 2025 isn’t just about identifying problems; it’s a call to action for proactive firms. Here are the key strategies separating the future winners from the rest:

1. Become a Catalyst, Not a Spectator

In a “wait-and-see” market, the first mover has a unique advantage. Sponsor-to-sponsor transactions can be particularly fruitful, as buyers recognize that selling GPs are increasingly making trade-offs between maximizing returns and achieving much-needed liquidity.

2. Refresh and Extend Value-Creation Plans

With hold periods lengthening, the old 3-5 year plan may no longer be enough. Winning GPs are:

• Revisiting Cost Programs: Even if done recently, generative AI is unlocking new levels of productivity and cost savings that weren’t possible just a few quarters ago.
• Focusing on Operating Leverage: In a world where multiple expansion can’t be relied upon, ensuring that revenue growth actually flows through to EBITDA margins is critical.
• Building a Convincing Growth Narrative: For exits, buyers need clear, evidence-based proof of a new chapter of growth, not just pro forma aspirations.

3. Conduct “Stress-Test” Due Diligence

The standard due diligence playbook is obsolete. Acquirers must now model not just the short-term impact of tariffs on costs and demand, but a company’s long-term resilience and ability to adapt to a potentially deglobalizing world. Supply chain flexibility, customer concentration, and pricing power are under the microscope.

4. Embrace a Systematic Fund-Raising Strategy

The era of informal fund-raising is over. GPs must proactively manage their investor relations, clearly articulate their differentiation, and understand that LPs are making more calculated, cautious decisions than ever before.

The Bottom Line of Bain Private Equity Report 2025: A Fundamental Reordering

The wild swings of 2025 are more than just a cycle. They signal a fundamental reordering of global trade and geopolitics. The assumptions that underpinned portfolio strategies at the start of the year may be obsolete.

As Bain concludes, “leaning into it is likely the best option”. The firms that will thrive are those that embrace proactive deal-making, rigorous due diligence, and operational excellence to build more resilient and valuable companies for this new era.

🔗 Links for More:

Read the full report on Bain website or from NeoForm LinkedIn page.

📌 About NeoForm:

At NeoForm Business Partners, we help private equity firms and their portfolio companies navigate complexity, build value, and achieve extraordinary results.

Visit our blog for more insights on private markets.

🔗 Related Readings:

• Healthcare Private Equity Trends in 2025 from Bain Report
• McKinsey Global Private Markets Report 2025
• Global Private Markets Report 2025: Private Equity Emerging from the Fog
• Private Equity Market Trends in 2025: A Year of Recovery and Strategic Shifts
• The Future of Investing: Private Markets and Credit in 2025

Need tailored solutions? Explore NEO Services or contact our partners to learn how our expertise can help you lean into the turbulence of 2025.