Prospects for 2025... Amongst the noise, what are the themes for PE? I was part of a virtual round table for Criticaleye last week, with the task of researching and presenting the prospects for the PE industry in 2025. I spoke with 9 senior or managing partners of UK based PE firms to get as broad a view as possible. In summary, a net positive view but not overwhelmingly so, due to a number of conflicting influences. On the positive side: * Greater political and economic stability * Interest rates will be (slowly) coming down * Investment banks have full WIP lists and not laying anyone off, signalling good deal flow for the year * High levels of uninvested capital, which should drive demand for deals * Firms have held on to assets for longer than usual, which adds to the pressure for exits However, on the negative side: * Fund raising is becoming very hard for the mid-market, meaning firms are incredibly cautious about risk on new deals (they can't afford any losses), which will keep the brakes on overall investment activity * The recent budget puts huge extra costs on businesses and it will take time for companies to devise their new plans. This makes investment appraisal harder/slower * The budget will have a few likely knock-on impacts, for example: - prices will have to go up (and therefore inflation) - hiring will slow down (and so unemployment will rise) - B2B customers will defer large new purchases (so sales growth in investee companies will slow/reverse) - B2C demand will reduce with increased inflation and unemployment. Some sectors will continue to be in favour (e.g. SaaS companies, albeit at huge prices) and some will struggle to trade (e.g. retail, hospitality) but people were generally positive. One thing was clear though was that there will be no big change in deal activity and any significant growth will be towards the back end of 2025.
Great insights on the PE market in 2025, Ben. Thanks for joining!
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3moGreat insights Ben, thanks for sharing. … quite the mixed bag there really. Good to hear that there is positivity. It echoes my thoughts that we will see an improvement towards the back end of 2025 and into 2026.