The global private equity industry enjoyed increasing investment, strong exit markets, healthy returns and robust fund-raising activity in 2017, according to a new report from Bain & Company.

But this good news has a downside. It has attracted so much capital “that the industry’s structural challenges have sharpened,” Bain’s head of global private equity Hugh MacArthur writes in the report’s introduction.

“If it’s possible, fund-raising has been too good, with an unprecedented $3 trillion raised over the past five years.”

The report said global buyout value grew 19%, to $440 billion, supported by a stream of large public-to-private deals. At the same time, global deal count has fallen substantially since 2014. Last year, it grew by just 2%, to 3,077 deals, off 19% from the 2014 high-water mark for deal activity in the current economic cycle.

Put another way, funds have tons of money to spend, but not enough appealing targets on which to spend it.

Multiples are at all-time highs, with around half of all companies acquired priced in excess of 11 times earnings before interest, taxes, depreciation and amortization.

Given this “frothy” environment, Bain’s report looks at how the private equity industry is responding to the current situation.

For one, firms are using a mix of tactics and strategies. Tactically, they are assessing and measuring portfolio management talent.

In addition, they are trying to get a handle on how rapid technological change is altering industry profit pools, so they can be first to take advantage of new opportunities and avoid pitfalls prior to investment. Although firms’ approach to assessing risks and opportunities over a typical holding period remains unchanged, they still need new tools to understand how technology affects industries, as evidenced by the rapid ascent of Amazon and its widespread effects.

“The good news,” the report said, “is that these changes and shifts can all be analyzed and understood.”

Private equity firms are also continuing to sharpen their activist approaches to creating value in partnership with management, since passively investing and simply trusting management to do the job is no longer efficacious.

One example in the business-to-business space is the emergence of aggressive commercial excellence programs to stimulate organic growth, which has eluded many industries since the recession.

As well, funds are applying many other approaches to working with management on both the revenue and cost sides, according to Bain.

On the strategic side, the report noted that abundant deals exist that could absorb the huge amount of dry powder general partners have raised. Last year, some 38,000 companies around the world were bought and sold, but private equity was involved in less than 10% of those deals.

Last week, a PitchBook study examined the implications of record dry power for private equity and venture capital fund managers.

Bain said that in order for private equity to reduce its overflowing coffers, the industry could bump up its share of the M&A market by winning more large-scale deals. How?

It said private equity funds have to earn greater equity returns than their competitors, corporate buyers, while avoiding the perils of overreach that characterized the industry in 2006 – 2007.

Bigger firms could become more like a “corporate,” it said, but more efficient and aggressive. This would entail using scope and scale deals to add large assets to equally large platforms in order to capture synergies and play the same game as many corporations, but with a higher bar.