Private equity firms gain momentum as deal activity rebounds and carried interest projections exceed market expectations
Key Takeaways
- UBS upgrades CVC Capital Partners to Buy with €19.60 price target citing over 20% upside potential as shares trade at unjustified discount to peers
- EQT AB receives upgrade from Sell to Buy with SEK 360 target as UBS projects €495 million in carried interest for 2025, significantly above €368 million consensus
- Private equity deal activity shows recovery momentum with both firms positioned to benefit from improving macro conditions and reduced regulatory uncertainty
Introduction
UBS has upgraded two major private equity firms to Buy status, signaling renewed confidence in the sector’s growth prospects. The investment bank elevated CVC Capital Partners PLC and EQT AB based on improving deal activity, carried interest potential, and easing macroeconomic uncertainty.
The upgrades reflect UBS’s optimistic outlook on private equity performance as market conditions stabilize. Both firms are positioned to capitalize on a resurgence in deal activity and fundraising momentum across European markets.
Key Developments
CVC Capital Partners receives a price target increase to €19.60 from €18.50, with UBS highlighting significant upside potential. Analysts led by Haley Tam noted the Luxembourg-based firm trades at an unjustified discount to peers despite strong fundamentals.
UBS projects CVC’s carried interest and performance-related earnings at €249 million for 2025, up from €182 million in 2024. While below the company’s medium-term target range of €400 million to €700 million, the trajectory shows clear improvement.
EQT AB receives a more dramatic upgrade from Sell to Buy, with the price target revised to SEK 360 from SEK 230. This adjustment reflects improved forecasts and a reduced discount rate applied to the Swedish firm’s valuation.
Market Impact
Private equity valuations have remained relatively stable despite increased market volatility, contrasting with the sharp rally in public markets over the past two years. Lower interest rates and prospects for reduced regulation provide supportive conditions for private equity investments.
Secondary funds are experiencing increased deal flow at discounted prices, creating attractive entry points for investors. The sector benefits from middle-market focus where valuations remain more attractive and leverage levels are typically lower.
EQT trades at 21.3 times 2026 earnings at the new target price, consistent with historical multiples and peer valuations. UBS expects the firm to achieve a 63% compound annual growth rate in performance-related earnings between 2024 and 2027.
Strategic Insights
The upgrades reflect a broader industry trend toward greater selectivity and thematic investing, particularly in technology-related segments. UBS favors managers targeting middle-market companies where innovation often emerges from mid-sized firms requiring adaptability in rapidly changing environments.
CVC demonstrates scalable growth across various asset classes, including secondaries, credit, and infrastructure. The firm’s new evergreen funds collected €1.3 billion in under a year, showcasing impressive growth compared to competitors’ slower fundraising efforts.
Deal activity initially slowed due to tariff-related uncertainty and broader bid-offer spreads. However, recovery signs emerge as the 90-day tariff pause window closes, with both firms experiencing significant activity increases in recent quarters.
Expert Opinions and Data
According to Investing.com, UBS expects positive updates from CVC on deal activity and fundraising during upcoming quarterly reports in August and September. Analysts project continued momentum through the year’s second half as market conditions improve.
“We see CVC shares trading at an unjustified discount to peers, with >20% upside potential from re-rating,” stated UBS analysts. The assessment highlights fundamental strength despite current market positioning.
For EQT, UBS analysts noted, “We expect 1H results to be a positive catalyst with EQT likely to beat consensus PRE expectations.” The firm’s deal tracker indicates increased industry activity since May 2025, supporting optimistic projections.
UBS projects EQT’s carried interest at €495 million for 2025, significantly surpassing both the €368 million consensus and EQT’s own guidance of €250 million for challenging market years.
Conclusion
UBS’s strategic pivot toward resilience and selectivity in private equity reflects confidence in sector fundamentals despite macro headwinds. The upgrades position both CVC Capital Partners and EQT AB to benefit from structural trends supporting middle-market investing and thematic opportunities.
The investment bank’s actions signal broader optimism about private equity’s ability to navigate current challenges while capitalizing on stable valuations and emerging growth sectors. Both firms maintain strong positioning to execute on deal opportunities as market conditions continue improving.
