Alpha Group's Sam Marsh explains why North American capital is turning to Europe in private markets
The total value of private equity deals keeps climbing, but according to one private market expert, the number of transactions tells a different story.
Across North America and Europe, the headline figures mask a market under strain, one where mid-sized and smaller managers are fighting for survival while the largest players raise ever-bigger funds.
As Sam Marsh, CEO of Alpha Group explains, while headline deal values in private equity continue to rise year on year, the transaction count paints a less flattering picture. Moreover, the pattern is the same whether you look at Canada, the US, or Europe. Mid-sized and smaller managers are bearing the brunt, unable to find the natural buyers that once existed to take on their built-up portfolio companies.
As a result, the traditional sequence of growing a deal and passing it up the chain to a larger house or the public markets has ground to a halt, compounded by successive waves of political disruption.
“Each start of the year at the moment seems to be a Donald Trump narrative. Last year he captured our imagination with the tariffs. This year he's gone one step further and gone into a full blown conflict,” said Marsh. “At the moment, private credit is a story of two worlds. You've got those who are holding assets that potentially have been caught on the wrong part of a cycle and then you've got those who have enough manager buy in from their LP base or a broader LP base who are looking to restructure opportunities and raise fresh capital. It’s a great time to get into the market and I think it's an interesting dynamic. PE is definitely still stagnant in the mid small size market. Private credit is a really interesting secondaries market that I think will start to build over time.”
Reflecting on the past year, Marsh acknowledged tariffs caused a sharp pause in private markets, but not a lasting shutdown. Once managers had time to reassess which sectors and geographies stood to lose or gain, confidence returned and dealmaking began to recover. He believes that rebound reflects the mindset of the people operating in the space, noting "it is some of the most entrepreneurial and creative minds that you have in finance," he said, adding they’re used to navigating disruption and finding openings where others see paralysis.
He notes that the initial shock was visible in transaction activity, with a steep drop in deals before momentum returned within a matter of months. Firms with conviction in their strategy, or simply fresh capital to deploy, were among the first to move back in. Marsh also argues that this latest bout of volatility has not hit as hard as the 2022 rate shock, because the market is no longer dealing with rising inflation and higher rates as a completely unfamiliar problem.
"People now are more well versed on how to manage with these types of cycles," he said.
While tariffs and related pressures are still squeezing companies, the impact is uneven across sectors, Marsh noted. But private equity firms have more room to maneuver than operating businesses tied to a single industry. They can shift their focus, hunt for openings in less exposed areas, and redirect capital where conditions look more favourable.
To that end, he points to a geographic knock-on effect, highlighting when disruption hit North America, some managers in Canada and the US expanded their activity into Europe instead. Ultimately, stress in one region helped drive more transatlantic dealmaking, with European assets drawing added interest from North American investors.
Yet, the differences between European and North American private markets are narrower than they might appear, Marsh noted. Most managers operate according to broadly international structures and conventions, so the core mechanics of the market tend to look much the same across regions.
The main distinction is that European managers are generally more accustomed to dealing with foreign exchange exposure, while North American firms are becoming more international and, in the process, more familiar with those demands. He also notes that fund sizes in the US and Canada tend to be larger, which naturally pushes transactions up in scale. Beyond that, he sees more overlap than divergence between the two markets.
“There are lots of similarities. I suppose the reality is that there's a lot more commonality between all the geographies than one would think partly because no investment manager is truly domestic,” noted marsh.
While LP allocations to private markets have actually grown, Marsh warns the headline numbers create a distorted picture, because the capital is concentrated among a shrinking pool of managers. A flight to safety over the past two years has rewarded those who can demonstrate strong risk controls, proper hedging across debt and foreign exchange, credible valuation metrics, and tight operational governance.
While private credit and private equity enjoyed a long period of steady expansion after the financial crisis, Marsh believes that run has now met its first real stress test. Risks that once sat in the realm of worst-case scenarios are becoming part of everyday decision-making, forcing managers to think more carefully about operational efficiency, risk controls, and how they will answer tougher questions from LPs.
He suggests that this is changing the balance of power inside firms. Operational and finance leaders are becoming far more central in conversations with investors, rather than leaving those discussions mainly to deal teams. Marsh believes LPs are no longer satisfied with hearing only how returns are generated in good conditions as they also want evidence that a manager can hold up when markets turn against them.
“In general, though, I think what we're starting to see is ‘an entrepreneurialism return’, said Marsh. “So there are going to be some managers that are going to be sitting on a pool of assets that they're going to be selling over a period of time. But you’re seeing a new surge of investment managers launch and getting a lot of appetite. You're seeing an increasing number of independent sponsors. So a lot more deal by deal transactions. I think that's very interesting and we'll continue to see the largest managers raise increasingly larger funds because they are increasingly proving that they are responsible allocators of capital.”
