Power Digital’s Expert Analysis of the 2025 Global Private Equity Landscape: Key Trends and Insights
by Kylie Carrasco •
As we begin 2025, the global private equity (PE) landscape finds itself at a crossroad, shaped by a combination of shifting macroeconomic forces, evolving regulations, and changing deal-making dynamics. Insights from Power Digital, in conjunction with the Dechert LLP 2024 Global Private Equity Outlook, highlight the challenges and opportunities that will define the PE sector in the year ahead. With a range of emerging trends set to impact the market, 2025 promises to be a year of both significant risk and reward for those in the industry. Below, we explore three key trends that are poised to influence the trajectory of private equity this year and beyond.
Trend 1: Interest Rate Cuts and Market Sentiment
Recent interest rate cuts have sparked renewed optimism within the private equity industry. As the cost of borrowing decreases, the potential for increased deal flow—particularly in the middle market—becomes more pronounced. This shift is crucial, as higher interest rates had previously stalled many deals, especially those requiring significant debt financing. However, as rates begin to ease, the gap between buyers’ and sellers’ pricing expectations narrows, creating a more favorable environment for transactions.
- Renewed optimism: Lower borrowing costs have rejuvenated deal activity, particularly in mid-market acquisitions, as financing becomes more accessible.
- Intensified competition: High-quality assets are now facing increased competition, pushing private equity firms to focus on operational efficiencies and innovative growth strategies.
- Impact of tariffs: Higher tariffs could raise costs for businesses reliant on international trade, creating opportunities for PE firms specializing in distressed assets and restructuring, but also introducing uncertainty in valuations.
As Adam Herman, VP of Partnerships and Private Equity at Power Digital, notes: “Lower borrowing costs have rejuvenated deal activity, particularly in mid-market acquisitions, as financing becomes more accessible. However, competition for high-quality assets has intensified, driving up valuations. PE firms are thus compelled to seek operational efficiencies and innovative growth strategies to justify premium prices.”
He further explains: “Higher tariffs have the potential to increase costs for businesses reliant on international trade, particularly in manufacturing, technology, and consumer goods. This has led to a wave of distressed assets and restructuring opportunities, making such companies attractive targets for PE firms specializing in turnarounds. However, these tariffs also introduce uncertainty into valuation models, as firms must account for fluctuating trade policies and their impact on profitability.”
Trend 2: A Potentially Bumpy Year Ahead for Dealmaking
2025 is set to be a year of both opportunity and challenge for dealmakers. A significant backlog of exits, combined with a lower cost of capital and evolving regulatory frameworks, signals heightened activity—yet with potentially bumpy terrain.
- Backlog of exits: Over the past few years, market volatility, rising interest rates, and geopolitical uncertainties caused many PE firms to delay exits, creating a backlog that will hit the market all at once in 2025.
- Competitive market: Sellers may face downward pressure on valuations, while buyers will have increased leverage, creating a competitive dynamic that will test both sides.
- Secondary buyouts: This influx of assets may present opportunities for secondary buyouts, as PE firms look to divest assets that align with other firms’ strategies.
Herman further comments: “2025 is set to be a bumpy year for private equity dealmakers due to a convergence of market dynamics, particularly a substantial backlog of exits. Over the past few years, market volatility, rising interest rates, and geopolitical uncertainties caused many PE firms to delay exits, waiting for more favorable conditions. Now, with improving economic indicators, a wave of postponed exits is hitting the market all at once.”
This influx of assets coming to market creates a dual challenge for private equity firms. On one hand, firms will have to differentiate their portfolio companies in a crowded market to command premium valuations. On the other hand, the potential for secondary buyouts exists, providing a potential avenue for firms looking to divest assets that align with other firms’ strategies. However, navigating these complexities requires a high degree of agility and foresight, making 2025 both an exciting and challenging year for PE firms.
Trend 3: Resilient Market Despite Economic Uncertainty
Despite global economic challenges—ranging from geopolitical instability to inflationary pressures—the private equity market has shown impressive resilience. According to recent reports, the market has experienced a steady recovery throughout 2024, and there is strong optimism for continued growth in 2025. The easing of interest rates, combined with a clearer political landscape following key elections, has set the stage for increased transactional activity.
- Market recovery: In 2024, global buyout value surged to $703 billion, a 47% increase from 2023, demonstrating the market’s capacity to rebound.
- Capital reserves: Private equity firms are sitting on $2.62 trillion in dry powder, signaling ample opportunity for deal activity in 2025.
- Increased deal flow: With easing interest rates and improving economic indicators, PE firms are well-positioned for continued growth, despite ongoing geopolitical and economic uncertainty.
As Herman observes: “There are plenty of ‘what if’s’ for 2025 when it comes to private equity, but I think the general sentiment is one of eagerness. The backlog of exits creates an interesting dynamic between buyer and seller… the cheapening of capital creates opportunity and increases competition for deals… the uncertainty of the economy has people pausing, but also leaning into new or different sectors.”
Next Steps: Strategic Agility Will Define 2025
As private equity firms navigate the challenges and opportunities that lie ahead, one thing is clear: success will depend on their ability to adapt strategically. Whether it’s capitalizing on lower interest rates, managing the influx of exits, or responding to the complexities of tariffs and regulatory changes, the firms that remain agile and proactive will be the ones poised to thrive.
- Agility is key: Success in 2025 will require firms to remain flexible and proactive in the face of shifting market dynamics.
- Operational focus: Those that emphasize operational efficiencies, differentiated assets, and strategic foresight will be best positioned to succeed in a competitive environment.
- Continued growth: With ample capital and optimism for increased deal flow, 2025 will likely be a busy year for private equity.
The year 2025 will undoubtedly be a busy one for private equity, but it will also be one of significant transformation. Those who can effectively manage these trends—coupled with a strategic focus on operational efficiencies, differentiated assets, and market insights—will emerge ahead in the evolving PE landscape.