Dealmaking and lending activity in private markets are “poised” for growth in 2026, with elevated levels of origination and financing in private credit as issuers seek new financing, according to T. Rowe Price.
Stabilising interest rates and lower volatility are helping to end the drought in key deal markets, while growing demand for capital to fund artificial intelligence (AI)-related projects is creating new opportunities, the global management firm said.
From 2022 to 2024, mergers and acquisitions (M&A) slowed dramatically, affecting both private equity and credit; however, both markets have now begun to recover, according to David DiPietro, head of private equity at T. Rowe Price.
Read more: GSAM: Private credit “important source of financing as M&A picks up
He stated that heightened M&A activity is driving demand in private credit.
“With significant private equity ‘dry powder’ waiting to be deployed, the need for private credit solutions is likely to rise as sponsors resume acquisitions,” he said.
T. Rowe Price has predicted a $1.2tn (£917.2bn) financing gap to deploy private equity dry powder.
Alongside heightened M&A activity, the need to finance technology infrastructure, including projects related to AI, such as data centres and utilities, is contributing to a new supply of opportunities for private credit investors.
“As issuers pursue expansion and technological capabilities, private credit providers are increasingly being called upon to fund the physical and digital backbone necessary for growth,” DiPietro said.
Alongside traditional lending, there are opportunities in distressed private credit, rescue capital and bespoke capital solutions, DiPietro added.
Read more: Alts drive performance fees at T. Rowe Price
Despite the recent high-profile bankruptcies of First Brands and Tricolor, DiPietro stated that, overall, private credit fundamentals remain “robust”, with default rates remaining low, company balance sheets currently strong and investor demand for private funding showing no sign of abating.
“While banks have tentatively begun to re-enter private credit after largely withdrawing in the aftermath of the global financial crisis, this is unlikely to significantly affect the illiquidity premium. The need for financing will likely continue to exceed the capital available,” he added.
Read more: Goldman Sachs and T.Rowe Price announce $1bn private markets partnership
