Private equity firms poised for global market disruption in 2025
The global M&A landscape is poised for a year of dynamic change and as macroeconomic disruptions dominate the markets, PE investors must adapt, according to CIL, the global management consultancy.
Predictions for strong economic growth in the US of 2.5% to 3% are tempered by more protectionist policies under the new administration of president elect Donald Trump, presenting both opportunities and challenges for PE investors. CIL also predicts an uptick in dealmaking next year driven by an improving interest rate environment which narrows valuation gaps and puts pressure on teams to close deals.
CIL’s Investment 360 Index reports the highest levels of confidence in the short-term UK economic outlook since its inception. Nearly half of respondents feel positive about the next 12 months, driven by easing interest rates and stabilising inflation. Similarly, CIL’s Mid-Market Pulse Check highlights a cautious but steady rebound in US deal activity, with expectations for moderate increases over the next year.
Jon Whiteman, managing partner at CIL, said: “2025 feels like the start of a prolonged period of macro disruption. This word carries both positive and negative connotations, and I think we’ll see plenty of both. From Trump tariffs and generative AI to digitisation and societal shifts, these forces are reshaping the global business environment.”
He continued: “PE tends to prefer stability, but despite the challenges, I expect deal activity to continue an upward trend through 2025. As interest rates improve, valuation gaps narrow, and deal teams face growing pressure to close transactions, we’ll see momentum build.”
In this disruptive environment, competition for the best deals will be fierce and PE firms will need to strike a balance between aggressive deal-making and diligent preparation, and businesses need to ensure they are adequately resourced if they hope to succeed.
Quality targets will be aggressively fought over
Whiteman said: “Top-tier targets will be aggressively fought over, requiring PE to act fast and with conviction. At the same time, there will be a mix of quality in the market, and investors will need to work hard to identify the diamonds in the rough.”
As 2025 unfolds, private equity investors will need to navigate a dynamic landscape of disruption and opportunity. With the right strategies, tools, and insights, they can not only overcome challenges but capitalize on the shifting environment.
Higher deal flow volumes will test firms’ capabilities
Axel Leichum, head of CIL’s North American operations, said: “Over the last couple of years, firms have streamlined their internal and external teams. A rapid return to higher deal volumes will test those capabilities.”
Looking specifically to the US, CIL predicts a mixed picture of success by sector, based on the new administration’s approach to policy. This will drive private equity firms to take a measured approach, adopting a ‘wait and see’ strategy.
Leichum said: “Private equity deal activity in the US is more likely to be influenced by sector-specific drivers, such as the need to generate returns and deploy dry powder, rather than macroeconomic conditions. There’s likely to be a greater preference for domestically focused businesses, which are less exposed to international supply chain and demand-side risks.”
