Private equity (PE) has reemerged in 2025 as a pivotal driver of business growth amid a landscape reshaped by economic uncertainty and changing financing conditions.
After the challenges of 2023, when deal volumes plunged due to high interest rates and risk aversion, the sector is witnessing renewed optimism, especially in mid-market segments and growth equity deals.
Deal values and counts in growth equity have surged over 50% year-to-date, underscoring PE's critical role in fueling expansion for promising companies.
Targeted Growth in the Mid-Market
Mid-market enterprises are particularly ripe for private equity investment. Many family-owned businesses facing succession issues look to PE for capital infusion and strategic partnership. This segment's relatively moderate valuations create attractive entry points for PE firms focused on operational improvements and value creation over the medium term.
Navigating Macroeconomic Headwinds
Sustained high interest rates and global volatility remain headwinds that recalibrate the PE playbook. Firms must now engineer stronger operational performance to meet higher expected internal rates of return. For instance, achieving a 20% IRR with current rates requires more than doubling annual earnings growth targets compared to earlier low-rate periods. This pushes sponsors toward asset-light, resilient-cash-flow models and deeper strategic transformations.
The Secondary Market's Rising Importance
The secondary market, including both Limited Partner (LP)-led and General Partner (GP)-led transactions, is booming. In 2024, secondaries deal flow hit $160 billion, with Q1 2025 seeing a 45% year-over-year increase. This trend reflects investor shifts to unlock liquidity and optimize portfolio exposures amid continuing market volatility. High-quality assets and newer fund vintages tend to retain more value in this space.
According to David Rubenstein, investor, "It's easier to raise money today than any other time I've been in the business in the last 30 years or so." He notes that while US public pension funds remain the largest source of capital for private equity, they will likely soon be replaced by sovereign wealth funds.
Larry Fink, CEO of a Leading Investment Management Firm, has been particularly bullish on private markets expansion, writing in his annual letter that firms should "unlock access to private markets" traditionally reserved for institutions.
Strategic Outlook
As 2025 progresses, PE firms are positioning themselves to capitalize on an expected rebound in M&A activity, driven by egress from the pandemic-induced lull and adapting to new global trade realities. The emphasis on disciplined underwriting, strategic sector focus, and innovative deal structures will distinguish winners in an environment marked by volatility but brimming with opportunity.
Private equity remains indispensable for funding growth, particularly in markets seeking capital and expertise to navigate complex transitions. By aligning capital with strategic management and value-driven exits, PE fosters resilience, innovation, and long-term corporate performance.
