Many successful small and mid-sized companies are increasingly opting to remain private, driven by a combination of strategic, financial, and operational factors. Founders often prefer to retain control and avoid the scrutiny, regulatory burden, and short-term pressure that come with public listings. The once-standard pathway of going public early is fading as companies now wait until they are more mature, potentially skipping small-cap indices altogether, and often find alternative growth and liquidity paths through acquisitions or private capital. As private capital has become more abundant and flexible, accessing public markets is no longer a necessity for scaling.

This shift is evident in the declining IPO activity. From 1980 to 1999, companies typically went public around their eighth year, but from 2000-2020, they waited closer to 11 years. Meanwhile, annual IPO volume has dropped from 307 to 125 over those same time frames. The public markets have grown less appealing due to high compliance costs, regulatory scrutiny, litigation risk, and pressure to deliver quarterly earnings that may conflict with long-term strategic goals. In contrast, private ownership allows businesses to focus on innovation, operational efficiency, and sustainable growth without the distractions of short-term investor expectations or volatility driven by high-frequency trading.[1]

The availability of private capital has helped accelerate this trend. Private equity and private debt markets now offer substantial capital with fewer constraints, enabling companies to fund growth while remaining private. PE firms also bring operational expertise, strategic guidance, and access to networks that foster long-term success.

This privatization trend is reshaping the U.S. corporate landscape. As of February 2023, 86% of U.S. companies generating over $100 million in annual revenue are private. Between 1992 and 2022, the number of private companies in the U.S. increased by 42%, while public company counts declined by 29%. This shift is particularly significant for the private equity industry, which plays a vital role in nurturing companies through key growth stages.[2]^,[3]

Structural tailwinds like reshoring are adding to the private market opportunity set. In response to tariffs, geopolitical tensions, and supply chain disruptions, many companies are moving production back to the U.S. Domestically focused firms, concentrated in the middle market, are seeking to gain competitive advantages and insulation from global policy changes. Small and mid-sized enterprises (SMEs) are becoming key players in restructured supply chains, benefiting from heightened demand for locally produced goods and services. Private equity-backed businesses in sectors like manufacturing, logistics, and technology are, in our view, well positioned to capitalize on these dynamics.

The current regulatory and tax environment should favor middle market private companies. Expected reforms aimed at reducing compliance burdens and taxes could further boost SME agility and profitability. Moreover, M&A activity is rebounding, with deal flow in 2024 trending toward the 10-year average of $393 billion and moving off the lows in the previous two years. Roughly 97% of PE exits over the past seven years have come through sponsor or corporate acquisitions, as IPO markets have remained virtually closed. Alternative liquidity solutions, such as continuation vehicles and secondaries, are helping address exit challenges.[4]^,[5]

Private equity has faced scrutiny and headwinds over recent years. As mega-cap private equity managers have grown rapidly by broadening their product offerings, leveraging brand strength, and attracting significant capital inflows, the asset class has expanded significantly but not without concerns. Their scale allows for substantial, stable revenues from management fees alone, which some critics argue reduces the incentive to generate strong performance-based returns. This shift in economics may encourage more conservative strategies and a focus on asset gathering over alpha generation, potentially leading to lower net returns for investors. At the same time, the long-term, illiquid nature of traditional private equity structures has come under increased scrutiny, especially as the IPO market has slowed and capital deployment lags commitments. These liquidity challenges have raised concerns about investor capital being tied up in underperforming or slow-to-exit assets, particularly in volatile market conditions.

In this evolving landscape, private markets offer a compelling opportunity to access the broader U.S. economy through a diverse array of private companies that are increasingly shaping domestic growth. Yet, the opportunity is not without complexity. Realizing its full potential requires more than capital, it requires strategic discipline, deep expertise, and a thoughtful, long-term approach.

[1] iCapital Alternatives Decoded: Navigating the World of Alternative Investments Q1 2025

[2] FS Investments: Fueling Growth: Mid-market PE and the U.S. Economic Boom

[3] iCapital Alternatives Decoded: Navigating the World of Alternative Investments Q1 2025

[4] iCapital Alternatives Decoded: Navigating the World of Alternative Investments Q4 2024

[5] FS Investments: Fueling Growth: Mid-market PE and the U.S. Economic Boom