Private Equity’s New Era: Challenges and Opportunities for H2 2025

The private equity sector in 2025 is confronting an era of profound transition. For years, superior returns were fueled by financial engineering and robust market cycles; today, success increasingly demands operational excellence, technological innovation, and strategic agility. This moment is both daunting and full of promise: for those with the right expertise, the opportunities to drive genuine value creation have never been greater.

Navigating Complexity: What’s Different Now?

• Deal Activity & Exits Under Strain: High interest rates and extended holding periods are stalling deals and exits. In the first half of 2025, PE activity remained muted-deal volumes are down, and exits are harder to realize, resulting in a growing backlog of sponsor-owned assets¹. To achieve a 20% IRR over a seven-year hold now requires a fund to deliver 4.2% annual earnings growth-more than double the rate required just a few years ago with lower rates¹.
• A $3.3 Trillion Funding Imbalance: Fundraising hasn’t kept pace with appetite: more than 18,000 private capital funds are on the road globally seeking $3.3 trillion, but there’s roughly $3 of demand for every $1 of new supply². That tension magnifies the imperative for superior execution and differentiation.
• Geopolitical and Macro Uncertainty: New tariff regimes, inflation, and persistent supply chain disruptions have injected further unpredictability into deal modeling and portfolio decision-making³.

Where Opportunity Lies

Despite these headwinds, the sector brims with untapped potential. Forward-looking sponsors continue to turn toward:

• Operational Transformation as a Value Driver: In the current environment, achieving target returns is as much about transforming operations, digitizing processes, and unlocking new growth levers as financial discipline. Bain & Company notes that to hit today’s stretched return targets, funds need to create “twice the value” through operational improvements compared to a low-rate world².
• Sector Specialization and Thematic Investing: Asset-light, tech-enabled business models, sustainability themes, and healthcare innovation are outpacing traditional sectors⁴. Rapid advances in AI, data analytics, and cloud technologies are reshaping competitive advantage and portfolio resilience⁴.
• Partnering for Expertise and Execution: From McKinsey and Bain to leading industry panels, the consensus is clear: no firm can internally master every aspect of technology, digital transformation, strategic branding, digital marketing, or human capital at the speed required. Trusted, nimble external partners-those with a proven record across the world’s best brands-are now seen as critical allies for planning, diligence, execution, branding, and culture-building⁴.
• Culture and Leadership as Differentiators: LPs are prioritizing GPs with distinctive talent strategies and strong in-house (or partner-sourced) operational capabilities³⁺⁴.

A Perspective from the Trenches

Our vantage point, shaped by years of partnering with emerging and world-class companies across technology, brand management, and human capital, isn’t unique-but it is both relevant and timely. We work quietly and flexibly alongside PE sponsors and management teams to accelerate transformation, embed next-generation technology, plan and execute digital branding campaigns, and recruit and train workforce talent.
What distinguishes leading partners today is not scale but adaptability to listen, the depth to execute, and the credibility to earn trust on critical, high-stakes projects. We’re proud to contribute that expertise in whatever form delivers the most impact: from deep technology diligence, to facilitating digital roadmaps, to supporting leadership and talent strategies across borders.

What Comes Next

If recent years have proven anything, it’s that change is the only constant in private capital. For PE leaders willing to rethink their approach to value creation and embrace support from trusted, experienced professionals, this complexity is not only manageable-it’s a unique source of competitive advantage. Together, we can help portfolio assets not just navigate the new realities but turn disruption into durable outperformance.

Learn how we partner with PE leaders to move faster, go deeper, and deliver more. Discover our comprehensive services.

References:

1. https://www.pwc.com/us/en/industries/financial-services/library/private-equity-deals-outlook.html
2. https://www.bain.com/insights/private-equity-midyear-report-2025/
3. https://www.foley.com/insights/publications/2025/04/updated-outlook-private-equity-2025/
4. https://www.mckinsey.com/industries/private-capital/our-insights/global-private-markets-report