How Sovereign AI Became the New Arena for State Power

AI has increasingly become one of the key strategic areas global governments are focused on – with each aiming to secure the talent, data, and infrastructure to build and control advanced systems at home. This push — which NVIDIA’s Jensen Huang has popularized as sovereign AI — reflects a broader return of state power to global markets.

On a recent webinar, the Jefferies Washington Strategy Team spoke with Professor Ahmed Banafa of San Jose State University, who highlighted five key themes shaping this competition.1

  1. Defining Sovereign AI

Sovereign AI is a nation’s ability to develop, deploy, and govern AI on its own terms. It’s about achieving autonomy across the full AI stack — data, infrastructure, and algorithms — so countries maintain strategic control. Unlike nationalization, which means direct government ownership, sovereign AI often includes private companies working in step with national goals. The U.S. shows this model in action through public-private partnerships and export controls, like the recent NVIDIA deal requiring 15% of revenue from China-bound chip sales to go to the federal government.

  1. Major Powers in the Lead

The race for AI sovereignty is intensifying among major powers. China has narrowed its AI gap with the U.S. to roughly a year, leveraging civil-military fusion and partnerships with firms like Alibaba and Huawei to target global leadership by 2030. The EU is pushing GAIA-X, an effort to build a secure, interoperable cloud that avoids reliance on U.S. giants like Amazon and Microsoft. But fragmented regulations and slower innovation remain hurdles for Europe’s competitiveness.2

  1. Middle Powers on the Rise

Countries like Saudi Arabia and the UAE are emerging as important players in the sovereign AI landscape. Saudi Arabia’s HUMAIN initiative launched ALLAM, an Arabic-language generative AI model, alongside plans to train one million citizens in AI. The UAE is investing heavily in data centers and domestic infrastructure. These moves reflect a broader shift: regional AI ecosystems forming outside the U.S.–China axis, with ambitions to cut dependence on foreign tech by the early 2030s.

  1. Opportunities and Risks

Sovereign AI can boost security, protect privacy, spur local economies, and create high-skilled jobs. It also supports autonomy in critical sectors like healthcare, finance, and defense. But the trade-offs are real: high infrastructure costs, siloed ecosystems, risks of bias from localized datasets, and limited talent diversity. These factors could slow innovation and lead to duplicative efforts across borders.

  1. Global Norms vs. Fragmentation

Efforts at global AI standards — through the UN, for example — may help set rules around privacy, ethics, and explainability (how an AI arrives at its outputs). These norms may help mitigate risks of unchecked AI proliferation and foster transparency across borders. However, with geopolitical competition and divergent regulatory philosophies, fragmentation is likely to persist.

The Implications for Investors

The push for sovereign AI favors domestic hardware makers, cloud infrastructure providers, and compliance specialists. NVIDIA, AMD, and firms advising on regulation stand to benefit. At the same time, investors need to account for volatility tied to export controls, shifting alliances, and uneven regulation. Key moves to watch include government funding levels, commitments to domestic buildouts, and the emergence of new regional AI hubs.

Looking Ahead

Sovereign AI is both an engine of innovation and a source of geopolitical friction. For investors and policy-makers, the challenge is to anticipate how governments will wield their power — and to position ahead of a future where AI leadership is defined less by global tech platforms and more by national borders.

Find more insights from the Jefferies Washington Strategy Team at Jefferies Insights.

  1. https://www.linkedin.com/in/ahmedbanafa/ ↩︎
  2. https://javatar.bluematrix.com/docs/html/a7dc138c-bb75-47df-a184-403e9f462229.html ↩︎

India’s IPO Market: Signs Point to a Strong Finish to 2025

India’s public markets are navigating a complicated mix of global and domestic challenges, but Jefferies’ Head of Equity Capital Markets, Jibi Jacob, sees encouraging signs for the rest of the year.

Tariffs, shifting investor flows, and secondary market volatility have tempered activity in recent months, but Jacob believes momentum is building toward a stronger finish to 2025. His advice to clients: stay ready.

Deal Sizes Rising, Investors Ready

India’s equity capital markets have grown in both scale and sophistication.1 Average deal sizes are climbing, and unlike many other regions, India offers unique flexibility for private equity firms seeking full exits.

“India’s markets now have the depth to take 100% PE-owned clients public and deliver full exits over time,” Jacob explained. “No other market really has the capacity to do that.”

This depth is reinforced by investors’ willingness to back issuances even when proceeds are secondary. In many markets, primary capital raises dominate. In India, large shareholder exits don’t deter demand. “Indian investors understand the lifecycle of PE firms,” Jacob noted. “Block trades aren’t viewed as a negative. This attitude really helps PE firms with price realization compared to private sales.”

That dynamic has supported an annual pipeline of more than $20 billion in secondary blocks, underscoring the strength of India’s domestic capital formation. Against this backdrop, Jacob expects 2025 to bring the largest wave yet of billion-dollar IPOs — seven or more compared to just three in 2024. A long list of multinational subsidiaries (Hyundai’s record $3 billion listing in 2024 being the benchmark) are preparing to test the waters.2 “The outlook is very encouraging,” he said.

Foreign Flows: At a Turning Point?

Foreign ownership of Indian equities is at its lowest level in a decade, and the MSCI India Index has lagged broader emerging markets by nearly 25%.3 Jacob, however, thinks the trough may be behind us.

“From a growth perspective, India is always a bright spot in emerging markets,” he said. “The market is a bit expensive, but it will stay that way as long as growth expectations remain strong.”

If in U.S., rate cuts begin which is what the street is expecting, Jacob believes foreign flows could return more meaningfully as investors chase better returns. Larger deal sizes also help. “India would have always had an EM allocation before, but now the same funds who have experience in India are getting their global funds to participate because there is a wider level of liquidity than ever before,” he added.

Tariffs and Global Headwinds

“There’s no question tariffs are an overhang,” Jacob acknowledged. “The longer they last, the greater the potential hit to growth. But they may also accelerate the push for domestic consumption, labour reforms and tax changes, much like the economic reforms of the early 1990s.”

Prime Minister Narendra Modi has already cut taxes to cushion the impact.

Staying Ready: Lessons from 2022

For companies preparing to go public, Jacob recommends they not wait too long.

“We remind clients of 2022. 2021 was one of the best years ever. Naturally we thought 2022 would be a rock-solid year as well, but Russia invaded Ukraine, and the markets tapered down globally. In 2021, we had 12 straight months of IPOs. In 2022, two or three months accounted for 60% of the volume,” he said. “Windows open and close quickly. Since it takes six to nine months to list from a standing start, readiness is everything.”

Jefferies is urging issuers to be prepared to move. “Don’t get distracted by the noise,” Jacob advised. “As long as the structural story for Indian equities is intact, the market will give you opportunities, but you need to be in position when the window comes.”

The upcoming festive season, running from September through year-end, could provide a tailwind. “Diwali lifts everyone’s spirits. We expect to see a strong deal calendar, with IPOs every month if not more,” he added. Jefferies has already led 12 IPOs in the last 12 months, raising $7.6 billion for clients.

Sector Trends: Beyond Tech and Consumer

India’s IPO market remains one of the most diversified globally, with strong activity across multiple industries. Jacob sees financial services, technology, and healthcare as the leading fundraising sectors for 2025, with industrials beginning to emerge as well.

“India isn’t just a one- or two-sector market story,” he said. “Investors have appetite across the spectrum, and that makes the market more resilient over time.”

Looking Ahead

Macroeconomic uncertainty, from tariffs to shifting U.S. economic momentum, will continue to shape India’s equity capital markets in the months ahead. But Jacob believes the fundamentals remain supportive.

“With valuations closer to long-term averages, large issuances in the pipeline, and secondary markets showing signs of stabilization, the setup for a stronger finish to 2025 is in place,” he said. “Our message to clients is simple: be ready.”

  1. https://www.jefferies.com/insights/the-big-picture/what-will-drive-indias-growth-for-the-next-20-years/ ↩︎
  2. https://www.hyundai.com/worldwide/en/newsroom/detail/hyundai-motor-india-makes-history-with-indiaE28099s-largest-ipo-and-plans-to-expand-investment-and-localize-ev-supply-network-0000000853 ↩︎
  3. https://www.google.com/search?q=msci+india+index&oq=msci+india+index&gs_lcrp=EgZjaHJvbWUyBggAEEUYOdIBCDE5NDJqMGo3qAIAsAIA&sourceid=chrome&ie=UTF-8 ↩︎

The Exit Doors Are Open

After two years of muted dealmaking by private equity sponsors, we have seen a healthy pickup in M&A and IPO activity and expect more momentum through next year. 

First, measurable M&A metrics have been trending higher over the last couple of months, including pitch activity (both pitches that have occurred and those already scheduled), number of deals signed, number of buyers at the “finish line”, and number of buyers pre-empting processes. We anticipate pitch activity and process launches to accelerate into year-end. Another good leading indicator: multiple buyers have emerged for high-quality businesses at levels not seen since 2021, and deals are being signed.

Second, what we see and hear from you:

  • Changing mood at Investment Committees: However you want to characterize it – risk on, leaning in – sponsors are more aggressively pursuing companies. We have witnessed four processes in the last month with pre-emptive sponsor bids, including re-bids in some cases. Higher-quality businesses are attracting multiple potential buyers at the finish line, and we are also seeing multiple buyers for most processes, compared to the “1 ½” buyers at the finish line typical of the past two years. 

Macro factors, such as lower volatility, increased economic confidence, and declining interest rate expectations, have certainly provided a tailwind. However, the most critical factor driving activity is a sponsor’s conviction behind their investment thesis. Private equity is bringing its traditional operational toolkit and leveraging AI, which is in the early innings of driving value. M&A processes need to incorporate these value drivers, as our PE clients are actively deploying AI across non-tech industries to bring significant margin uplift. While the pressure to deploy capital is always present, given the J-Curve, sponsors will only do deals when they make sense.

  • Sellers are becoming more active: Sponsors are increasingly gearing up for exits, driven by portfolio companies growing into valuations (primarily through growth versus multiple expansion), and narrowing bid-ask spreads. Valuations are approaching levels that enable sponsors to achieve solid multiples on invested capital that are at or often above their marks. Meanwhile, the “bid” side has moved upward to levels that selling sponsors were targeting one to two years ago. The average hold is currently at a record period, as many sponsors delayed exits for the last two years while waiting for markets to improve. When you combine the growing number of sell-side transactions that haven’t been completed with the increased availability of portfolio companies held for six years or more, you have a recipe for a lot of actionable deals. 

To capitalize on these opportunities, consider revisiting busted auction logs, surveying long-in-the-tooth portfolio companies and sponsors focused on DPI, and attending Jefferies’ private company conferences this Fall. There is a high probability that more companies will come to market over the next twelve months, some through more bespoke and targeted M&A processes.

Dovetailing with our outlook for accelerating private equity activity, we also see a resurgence in large-cap LBOs and a wide-open IPO window. 

  • Large-Cap LBO Resurgence: The last few months saw several $3+ billion deals and five at $7+ billion. Many followed the “updated” M&A/sponsor playbook for syndicating large equity checks, which includes:
    • Forming consortiums.
    • Identifying sovereign wealth funds and LPs early to play critical partner roles.
    • Generating equity co-investment demand through rapidly growing retail channels.
    • Tapping into record depths in the preferred market.
    • Achieving robust financing terms with competitive processes amongst banks and between direct and broadly syndicated loan markets.

Jefferies recently deployed this playbook on two transactions:  we served as Lead Financial Advisor for PCI Pharma in its equity recapitalization and Joint Financial Advisor to STADA Arzneimittel, representing the largest European LBO M&A deal of 2025. In this market, there is no shortage of banks and direct lenders competing for $5+ billion financing structures. Other drivers of the large-cap LBO resurgence include abundant dry powder and actionable opportunities (especially in the public equity markets). While the IPO market is now wide open, a sizable backlog in the IPO pipeline remains, which could prompt sponsors to pivot to M&A exits.

  • The IPO market we have been waiting for: Global equity markets are at or near all-time highs, volatility is at sustained low levels, and recent IPO aftermarket performance has been exceptional and broad-based: Average U.S. IPO aftermarket performance has been 30%+, with sponsor IPO performance even better. We have waited three years for this IPO market, with Jefferies CEO Rich Handler and President Brian Friedman recently writing, “the stars are probably as aligned as one can hope to achieve successful outcomes.” Jefferies Macro Strategist David Zervos recently penned “The Uncertainty Hoax,” in which he said, “For the naysayers who have completely misjudged financial markets this year, the word ‘uncertainty’ has become a constant cover for failure.”  

Two final macro tailwinds are bolstering the case for continued optimism.

  • AI has arrived as a meaningful value generator: Private equity has always been a clear leader in operational value creation, and now artificial intelligence has arrived as a major value driver. The use and benefits of AI are no longer just speculative or aspirational in portfolio companies. It now provides real value and enhances profitability well beyond summarizing information. Companies are increasingly utilizing AI to support pricing models, optimize logistics and inventory management, and uncover new growth opportunities. AI is driving a more fundamental change in businesses of all sizes and sectors than many on Wall Street realize.
  • Retail has the potential to transform the private equity industry dramatically. Anytime an asset class has a dramatic influx of capital, there will be opportunities and pressures. In the coming months and years, an influx of retail capital will create alternative paths for sourcing LP equity co-investments and also for exits, alter the M&A landscape (much like the continuation fund product which Jefferies remains quite active with), challenge private equity in their deal sourcing to deploy capital, and heighten the importance of operational value-add. Private equity will adapt.

We look forward to a busy remainder of the year. Our team consistently strives to add value through creative ideas and content, innovative structures and financing solutions, and exceptional execution.

Secondary Market Surge: How Evergreen Vehicles Are Writing Private Equity’s Next Chapter

In 2025, the rapidly expanding secondary market is coinciding with the rise of evergreen vehicles targeting non-institutional investors. This is not a coincidence. This is a timely convergence of supply and demand that’s reshaping how capital flows into private markets.

Evergreen vehicles, which are open-ended funds often structured under the Investment Company Act of 1940 (“’40 Act”), have surged to an estimated $80 billion in assets under management, doubling over the past 18 months1. That figure likely understates the true scale, as several managers are deploying capital from private evergreen structures that are not yet required to disclose fundraising activity or dry powder levels.

At the same time, secondary markets are offering precisely what evergreen vehicles need: mature, cash-flowing assets that enable them to deploy capital quickly and diversify broadly. Jefferies estimates that approximately 41% of evergreen NAV is now allocated to secondaries2, reflecting a deliberate strategy to match investor demand for liquidity and immediacy with seasoned private equity exposure. In fact, several managers have launched secondaries-only evergreen vehicles to squarely capitalize on the market opportunity.

Despite broader market volatility, transaction activity across both evergreen and secondary strategies has remained resilient. The timing couldn’t be better, with non-institutional investors increasingly seeking semi-liquid access to private markets, and secondaries providing the mechanism to deliver it.

Why Wealth Investors Favor Evergreen Funds

Evergreen funds offer several advantages for high-net-worth individuals and wider non-institutional investors, who have historically faced barriers to private market access:

  1. Immediate capital deployment into seasoned assets
  2. Periodic liquidity, often quarterly, versus the multi-year lockups typical of traditional private equity
  3. Broad diversification across sectors, geographies, and deal types
  4. Lower investment minimums and streamlined subscription processes

Importantly, evergreen vehicles are structured to issue Form 1099s instead of K1s, which are more common in traditional private equity. This makes tax filings easier and faster for individual investors, especially those who file independently.

How are Evergreen Vehicles Participating in the Secondary Market

As evergreen vehicles gain traction, their role in secondary transactions is becoming more sophisticated and strategic. Key areas of participation include:

  1. Diversified, buyout-focused LP portfolios of well-known managers
  2. Upsizing total commitment amounts alongside drawdown fund capital into GP-led transactions
  3. Smaller, often syndicate-level check sizes into GP-led transactions

These approaches allow evergreen vehicles to deploy capital efficiently while maintaining flexibility across deal structures.

Why Investment Managers Are Eager to Launch Their Own Evergreen Funds

For investment managers, evergreen structures offer compelling advantages that align with long-term strategic goals. Key drivers include:

  1. Expansion of stable assets under management with sticky, perpetual capital
  2. Continuous capital raising with recycling of cash flows, resulting in a flywheel of investible capital
  3. Expanded buying capacity, which amplifies deal-winning power, especially in secondary transactions

To fully capitalize on these benefits, managers must invest in robust cash management capabilities and establish or rely on existing distribution networks tailored to non-institutional channels.

Looking Ahead: A Market in Transition

The rapid growth of the secondary market and the emergence of evergreen vehicles accessing private investments have converged at an opportune moment. Non-institutional capital is helping to address the secondary market’s undercapitalization, easing the liquidity strain caused by historically low distributions.

This trend is still in its early stages, with evergreen vehicles expanding in scale and diversity to meet rising demand. As these vehicles grow, they will support larger commitments to individual companies, increasingly replacing upsized drawdown fund checks with lead equity investments from evergreen capital pools. Investors will benefit from a broader range of evergreen strategies, including those focused on private equity secondaries, credit, or infrastructure. Importantly, the penetration of non-institutional capital into private markets remains limited. With global financial wealth exceeding $305 trillion3, even a modest reallocation toward private markets—particularly secondaries—could unlock a generational shift in capital formation.

1: Based upon publicly available data; Funds registered under the SEC’s Investment Company Act of 1940 (’40 Act).

2: Based upon publicly available data; Portfolio composition calculated as a % of NAV as of March 31, 2025.

3: https://www.bcg.com/publications/2025/global-wealth-report-2025-rethinking-rules-for-growth#:~:text=Global%20financial%20wealth%20reached%20%24305,Cross%2Dborder%20flows%20accelerated.

Washington, Markets, and the Road Ahead: Key Takeaways from Jefferies’ Mid-Year Policy Update

On a recent Jefferies webinar, leaders from the firm’s Washington Policy & Sustainability, and Global Macro teams explored how U.S. policy and global macro trends are shaping investor behavior heading into the second half of the year.

The session featured Aniket Shah, Global Head of Washington Policy and Sustainability & Transition Strategy, in conversation with Mohit Kumar, Jefferies’ Chief Economist, and was moderated by William Beavington, Equity Specialist Sales, TMT.

Trump Advances the Platform He Ran On

Six months into the new administration, the policy environment is proving more predictable than many expected. U.S. Economic Policy Uncertainty (EPU) has dropped meaningfully since “Liberation Day,” when the administration sharply raised tariffs earlier this year.1 Monthly EPU peaked at 7.5% and has fallen to around 2%; daily EPU has dropped from over 9% to about 5%.

Part of that decline may reflect the perception that — whether or not one agrees with the agenda — President Trump is following through on what he campaigned on.

From immigration and trade to taxes and deregulation, the president’s policy platform aligns closely with his campaign promises. Border enforcement has tightened, with illegal crossings dropping from 250,000 per month under the prior administration to 25,000 in June.2 Tariff rates have risen sharply, from a weighted average of 2% to nearly 18%. The administration is also working to make Trump-era tax cuts permanent, with future offsets coming from cuts to Medicaid, clean energy programs, and EV incentives.3

One event investors are watching closely is the Fall 2025 Deregulation Agenda, due in October from the Office of Information and Regulatory Affairs.4 Federal agencies will be required to lay out how they plan to lower regulatory costs in line with the administration’s direction. Shah noted that while deregulation so far has mostly come through non-enforcement, this will be the first time agencies must formally detail how they intend to roll back rules — particularly in areas like energy and permitting.

A Strong Industrial Platform with a Focus on AI

A hands-on industrial policy has been a central feature of the president’s agenda.

Shah pointed to the Department of Defense’s recent public stake in MP Materials, a rare-earth mining company, as an early example.5 The company’s stock rose 20% on the news. More moves like this are likely, especially with a federal AI action plan expected soon. The administration is weighing $100 million in incentives to attract high-skilled software engineers from China, India, and South Korea, and is also looking to speed up permitting for power infrastructure to meet rising compute demand.

Shah tied these efforts to the broader goal of maintaining U.S. leadership in AI. The White House has floated a moratorium on state-level restrictions and is pushing for stronger federal control over AI regulation. The aim, he said, is to position the U.S. as a center of excellence — one with both the talent and infrastructure needed to stay ahead.

How Markets Are Responding to Recent Policy Moves

Kumar offered a readout on how markets are absorbing all this.

U.S. equities and credit are both near record highs, but he described the rally as driven more by positioning than by fundamentals. In April, investors were as underweight U.S. assets as they’ve been since the global financial crisis.6 As prices rose, they were forced to chase the market. Flows into passive funds accelerated the move, and enthusiasm around AI helped sustain it.

Still, he noted, the underlying picture has held up better than many expected. Recession fears have eased.7 Unemployment peaked at just 4.5%, well below levels typically associated with recession. Jefferies expects the S&P 500 to finish the year higher, and sees room for improvement in credit markets as well.

When Tariffs Might Start to Show Up in the Data

The effects of tariffs haven’t fully shown up in the data yet. Kumar said supply chain impacts tend to take about three months to register. That means July’s economic data, due in August, will offer the first clear read. There are other possible drag factors, too. If immigration and government hiring both slow, payroll growth could fall by 50,000 to 60,000 jobs per month. That could bring net new jobs close to zero.

At the same time, the administration’s new tariffs are expected to generate around $200 billion annually — roughly the cost of its new budget package, the OBBB.8 Shah noted that level of revenue will be politically difficult for future presidents to unwind. The current tariff regime, in other words, may be sticky.

The Fed’s Position Amid Expanding Executive Power

The Fed’s role also came up. The Supreme Court has recently expanded the president’s power over independent agencies, allowing more control over personnel and budgets. But it has drawn a clear line around the Fed, referring to it as a “quasi-private” institution, distinct from other agencies.9 10 Shah suggested that this distinction is aimed at maintaining international trust in the central bank.

There’s been speculation about whether Powell will be replaced. While Shah acknowledged that some “auditioning” is already happening behind the scenes, he and Kumar agreed that removing Powell could be more trouble than it’s worth. The Fed’s credibility remains key to maintaining dollar strength and market stability, particularly in Asia.

How U.S. Markets Compare to Global Alternatives

Looking abroad, Shah pointed to China’s upcoming 15th Five-Year Plan, due in October, as a key moment.11 It will lay out the country’s industrial priorities and likely reinforce the U.S.’s desire to respond with its own industrial policy. Southeast Asia may benefit in the short term, but Kumar sees the U.S. as the more attractive market over the next five years. Europe, he argued, faces demographic challenges, slower growth, and heavier regulation. Asia, while dynamic, is grappling with its own productivity constraints. Meanwhile, U.S. tech is still early in its AI cycle, and financials remain strong.

For investors, the second half of the year will bring several key signals: the deregulation agenda, AI policy, and China’s industrial roadmap. Much of the year’s direction has already been set — but how those plans take shape could determine what markets do next.

  1. https://www.csis.org/analysis/liberation-day-tariffs-explained ↩︎
  2. https://www.axios.com/2025/03/04/illegal-border-crossings-february-decline-trump ↩︎
  3. https://www.nbcnews.com/news/us-news/trump-big-beautiful-bill-tax-changes-rcna219853 ↩︎
  4. https://obamawhitehouse.archives.gov/omb/oira ↩︎
  5. https://www.ft.com/content/79b1693a-0788-4dc6-b431-027695534c62 ↩︎
  6. https://www.youtube.com/watch?v=kw9qp3XSzKM ↩︎
  7. https://www.wsj.com/economy/economists-us-recession-expectation-survey-91e45d95?gaa_at=eafs&gaa_n=ASWzDAgsTQfz65Dp1Kmri7I5bA8TUPUeUoDaxkgD-op-pfcbJFSzo24Nz5LUdfFMatM&gaa_ts=687fbd4a&gaa_sig=srxIxtcvmweB08GL8L8ktQOBGmSzOWuI7dIDWLNLhunGHCaeK2hnEBCUiTxm77p38n6XNkLvD_Yk6ZqN1XWxbw ↩︎
  8. https://www.whitehouse.gov/obbb/ ↩︎
  9. https://www.cshlaw.com/resources/u-s-supreme-court-authorizes-immediate-changes-at-independent-federal-agencies/ ↩︎
  10. https://www.supremecourt.gov/opinions/24pdf/24a966_1b8e.pdf ↩︎
  11. https://www.china-briefing.com/news/chinas-15th-five-year-plan-what-we-know-so-far/ ↩︎

SoftwareOne–Crayon Shows What’s Possible in Swiss M&A

In Switzerland, total M&A deal value grew significantly last year, thanks to larger average deal sizes. There were 464 M&A deals in 2024 — down 4 percent from the year before — but total value surged more than 50 percent, from $72 billion to $115 billion. IPO activity followed a similar pattern, with marquee listings like Galderma’s $2.6 billion IPO and Sunrise’s return to the Swiss exchange in November.1, 2

Global geopolitical and economic uncertainty has kept investors cautious, but Switzerland’s stable regulatory environment and low interest rates have helped keep it attractive for dealmaking, based on PWC’s 2025 outlook.3 Heading into the new year, many expected a more active 2025.

That momentum is starting to show up in the market, as one of the year’s standout transactions just closed: SoftwareOne’s public takeover of Crayon, advised by Jefferies.4

The deal brings together two major players in software and cloud solutions. Valued at $1.5 billion, it’s the largest pan-European transaction in two years and the only Swiss-led acquisition since 2022 to top the $1 billion mark.

The deal is notable for a few reasons. First, it marks Jefferies’ first public buy-side takeover in Switzerland for a local corporate client. The transaction follows the appointment of Vincent Thiebaud as Head of Switzerland Investment Banking in June 2024 — a move that reinforces Jefferies’ commitment to growing its presence in the DACH region.

More fundamentally, the structure and execution of the transaction broke new ground in the Swiss market. The offer included a 40/60 mix of cash and stock, a structure not commonly seen in Switzerland. It delivered a premium of up to 40 percent for both SoftwareOne and Crayon shareholders and was financed through a mix of new equity and fresh capital, all while preserving SoftwareOne’s dividend policy and investment-grade profile.

Executing the deal required coordination across two regulatory systems — Swiss and Norwegian — as well as a dual listing in Oslo to accommodate Crayon’s investor base. Jefferies secured early commitments from key shareholders and helped convert skeptics into supporters, ultimately winning backing from over 90 percent of Crayon shareholders, including the Norwegian Pension Fund.

Despite a 55 percent decline in SoftwareOne’s valuation in the months leading up to the announcement, the deal went forward, underscoring the strength of the strategic rationale. The combined company is expected to generate CHF 80–100 million in cost synergies and position itself as a global leader in software and cloud services. Jefferies also managed antitrust and regulatory approvals across more than ten jurisdictions, adding yet another layer of complexity to an already ambitious cross-border transaction.

The SoftwareOne–Crayon deal reflects the kind of cross-border activity that’s still possible in Switzerland, even in a cautious market. It also points to a more flexible approach to deal structuring, shareholder engagement, and regulatory coordination — one that may become more common as dealmaking picks up. With stable fundamentals and signs of renewed momentum, Switzerland remains a reliable platform for companies looking to make strategic moves, both at home and abroad.

  1. https://www.galderma.com/news/galderma-launches-ipo-six-swiss-exchange-and-sets-price-range-0 ↩︎
  2. https://www.six-group.com/en/newsroom/media-releases/2024/20241115-sunrise-listing.html ↩︎
  3. https://www.pwc.ch/en/insights/strategy/m-and-a-industry-trends-2025-outlook.html ↩︎
  4. https://www.softwareone.com/en/investors/softwareone-crayon ↩︎

A Dramatic Shift in The Credit Secondaries Market – Continuation Vehicles Become Mainstream

The credit secondaries market is surging and should be the fastest-growing segment of the secondaries market for years to come. A record number of investors entered the market for credit secondaries in 2024, a year marked by several marquee transactions and the growth in general partner (GP)-led deals, including continuation vehicles. Halfway through 2025, this trend continues to accelerate at a fast pace.

Based on Jefferies’ advised transactions and our credit secondaries market survey, the volume of credit secondaries transactions rose from $6 billion in 2023 to $10 billion in 2024. We expect the volume of credit secondaries transactions to increase to $17+ billion in 2025, representing a CAGR of 70%+ since 2023.  

Meanwhile, the mix of transaction type in the credit secondary market is changing rapidly. The survey found that in 2024, 62% of transaction volume were limited partners (LPs) selling commitments in credit funds (i.e., LP-led), while 38% were led by GPs. In the second half of 2024, GP-led deals picked up, and Jefferies expects GP-leds to account for more than 70% of transaction volume in 2025.

In many ways, private credit secondaries are situated where the much larger private equity secondaries market was approximately five or so years ago.

Private equity secondaries remain the dominant force today, with volumes exceeding $160 billion annually and expected to reach $200 billion by the end of 2025. Private credit secondaries, while a fraction of the size, are growing quickly and could reach $40+ billion by 2027.

A perfect storm of factors is driving the growth of the credit continuation vehicle market:

  • LPs Desire for Liquidity: LPs are increasingly seeking liquidity solutions, as traditional exit routes (M&A and IPOs) have continued to experience a slow recovery, resulting in lower-than-expected distributions. In some cases, the extended hold periods have led to fund leverage being paid down faster than anticipated, resulting in less optimal debt-to-equity fund ratios and diminishing fund returns.  
  • Inflows of Dedicated Capital: There is a significant influx of capital specifically targeted at credit secondaries with the appropriate cost of capital. Historically, investors were targeting mid-teens-plus returns, but with capital from dedicated secondary credit funds, insurance companies, sovereign wealth funds, family offices, and alternative asset managers, among others, targeting direct lending (low double-digit returns) and opportunistic credit (mid- to high-teen returns), the market is ripe for continued growth. This has led to attractive pricing and an increased appetite for scaled, diversified portfolios.
  • Blue-Chip Lender Adoption: A number of blue-chip private credit managers have utilized continuation vehicles to provide comprehensive liquidity solutions for their respective LP bases, given the narrowing bid-ask spread in the market and benefits afforded to all stakeholders. This adoption continues to fuel considerable interest from other private credit managers.
  • Challenging Fundraising Conditions: As private credit funds encounter headwinds in a challenging fundraising environment, continuation vehicles enable GPs to access dry powder while providing their LPs with an optional liquidity event that locks in attractive returns today. This can be particularly relevant for direct lending funds where leverage facilities are accelerating their paydown, thereby deteriorating the funds’ go-forward IRR.
  • Regulatory and Market Shifts: Tighter bank lending standards and evolving regulations have pushed more activity into private credit markets, as borrowers value the speed and flexibility of these solutions. The private credit market has grown substantially since the 2008 Financial Crisis, with tremendous amounts of capital ready to be “unlocked” through credit secondary solutions. 
  • Emergence of Specialist Strategies: As the credit secondaries market continues to deepen, appetite for more opportunistic credit strategies (including mezzanine, opportunistic, venture, and annual recurring revenue, among others) will continue to develop.

The Jefferies survey also identified significant changes in credit secondaries pricing. With a growing base of dedicated capital able to underwrite credit secondaries transactions at the right cost of capital, pricing has been enhanced materially for both LP and GP-led transactions. GP-led transactions for direct lending portfolios, in particular, priced between 95% and 100%.  

All of this helps explain why credit secondary volume in the first half of 2025 was driven primarily by GPs. So far this year, there have been five credit secondaries transactions that exceeded $1 billion (Jefferies advised clients on three of them).

While more secondary credit investors prefer senior-secured, sponsor-backed direct lending portfolios, 2024 also saw many transactions with more diverse risk profiles close. Of the $10 billion in transaction volume in 2024, the Jefferies survey found 65% was in direct lending, 19% in opportunistic transactions, and 16% in mezzanine transactions.

The estimated dry powder from dedicated pools of capital in the market today exceeds $20 billion. The credit secondaries market is getting deeper and more diverse, and Jefferies has continued to identify new investors who are actively entering and in the process of evaluating their entry into this market.  

The perfect storm of tailwinds propelling the credit secondaries market – and continuation vehicles in particular – shows no signs of abating, and investors are likely to find compelling opportunities in this market for the rest of 2025 and beyond.

Making Sense of the Head Spinning Changes in Fixed-Income European ETFs

Amid a global influx of capital and a constant drive for innovation, fixed-income exchange-traded funds (ETFs) are becoming increasingly numerous, accessible, and convenient. This market has recently become more transparent and automated, enabling investors to manage risk in ways they may not have been able to before.   

This trend is prompting many large institutional investors to take a closer look at European fixed-income ETFs as essential tools for managing their risk and cash, as well as assessing liquidity in the fast-moving and changing credit bond market.

In recent years, investors seeking European fixed-income exposure have faced barriers to liquidity, access, and transparency. In the U.S., you can trade in deep government and corporate bond ETF markets in readily accessible and centralized exchanges. By contrast, each ETF in Europe is often listed in several countries and traded in over-the-counter transactions. Upon further examination of the underlying bond market, across European investment-grade and high-yield bonds, approximately 60% trade daily or weekly, another 30% trade a few times a month, and 10% trade barely at all. European bonds also typically have higher minimum denominations of $100,000.

However, surging investor interest and product innovation are invigorating the market. Fixed-income ETFs in Europe have now surpassed the $500 billion AUM mark, growing at a rate of more than 15% annually.

Regulatory tailwinds, such as MiFID II and ESG regulations, have all boosted demand for ETFs, growing the client base and introducing new use cases. Factors making fixed-income ETFs more attractive include the easing cycle of central banks, the rebalancing away from dollar assets into euro assets, and the pace at which the market tends to move. By 2030, we forecast that the global fixed-income ETF AUM will grow to $6 trillion, with actively managed fixed-income ETFs exceeding $1.5 trillion.

Many of the new entrants to this market in recent years are global macro and systematic hedge funds, central banks, sovereign wealth funds, large asset managers, and a growing portion of retail aggregators.

The market has also quickly moved beyond simple index mainstream trackers. Now, providers offer a wide variety of fixed-income ETFs, including core, active, tactical, duration-managed, and ESG-focused options. New offerings hit the market regularly, becoming increasingly sophisticated to deliver access to every corner of the fixed income market. For example, it was only within the last three months that the Jefferies fixed-income ETF desk began to encounter and trade AAA-rated CLO ETFs and private credit ETFs.

When institutional investors decide to trade in European fixed-income ETFs, they derive significant benefits from working with an authorized participant that has extensive experience in this market.   

Authorized participants can facilitate large block trades directly with ETF issuers through the primary market, independent of the volume available in the secondary market, according to State Street.1 This is especially important for fixed-income ETFs, where large orders might otherwise move market prices or not be fully executed on the exchange.

Additionally, authorized participants can help ensure that ETF prices remain close to their net asset value by creating or redeeming shares in response to supply and demand imbalances, according to VanEck.2 This reduces the risk of trading at a significant premium or discount. By trading directly in the primary market, authorized participants can achieve more cost-effective large transactions, as it avoids the bid-ask spreads and market impact costs associated with secondary market trades.

Authorized participants optimize primary bond baskets by examining the distribution of risk the ETFs are tracking across multiple factors, such as duration, spread, compression, and industry. They then select bonds within each of these risk buckets to keep the fund aligned with its benchmark or objective functions. Selecting bonds is truly at the core of this new protocol of trading. With abundant data and technology, Jefferies has developed a complex scoring mechanism to assess liquidity and momentum across tens of thousands of bonds. An authorized participant negotiates with ETF issuers by uploading a proposal for the primary basket. The ETF issuer will then respond with suggestions, pushbacks, and agreements.

When an authorized participant can act as a market maker, it can often find the best prices and provide immediate liquidity. At Jefferies, we maintain substantial capital on our balance sheet that can be readily deployed at any time for fixed-income ETFs, offering clients quotes based on multiple layers of liquidity. 

The European fixed-income ETF market increasingly resembles a Damien Hirst pointillist painting, with thousands of individual dots representing multiple layers of bonds’ liquidity and alpha. It’s up to the authorized participant to see the whole picture and help clients find the best combination of options to meet their alpha generation, risk mitigation, and liquidity needs.

  1. https://www.ssga.com/library-content/assets/pdf/north-america/etf-education/spdr-guide-for-institutional-investors.pdf ↩︎
  2. https://www.vaneck.com/pt/en/authorized-participants/ ↩︎