Evolving Private Equity Landscape – Exploring New Capital Sources and Exit Strategies

As we look ahead to 2025, several key trends are emerging, highlighting the evolving landscape and strategic opportunities for private equity investors.

Key Considerations in 2025

Liquidity Challenges Facing the PE Industry

GPs have been distributing, on average, around 11% of portfolio NAV this year and last year. That is significantly down from the 20–30% average over the past decade.

Whilst exits are up this year compared to last year (Dealogic says up by approximately 5% on deal count and about 24% by deal value year to date) on a relative basis, exits are still some ways short of historic NAV averages and certainly down by both exit volume and values from five years ago.

The lack of liquidity and associated pressure on LPs is causing GPs to pursue new sources of capital (such as retail wealth) as well as non-traditional exit options (such as continuation vehicles).

Carve-Outs on the Rise

AI's Private Equity Impact

AI is set to significantly impact the private equity industry by driving operational efficiencies. Its effectiveness in risk management, monitoring, and value creation will attract high investor interest. Successful AI implementation requires management buy-in, training, and resource management, along with understanding legal and ethical implications.

We expect the lowering of barriers to entry in the software industry as a result of deployment of AI and knock-on margin impact in software businesses.

Healthcare and Technology M&A Consolidation

Impact Investing in Healthcare

Impact investing, especially in healthcare, is likely to be an area of focus. Patient centricity offers growth opportunities as businesses innovate to meet demands for more access and control over healthcare data. Expanding data collection to include diverse populations can lead to more accurate, personalised healthcare solutions, addressing untapped markets and improving overall population health.

Trends and themes to act on

Invest in Patient-Centric Healthcare Solutions: Look to focus on funding and developing technologies that enhance patient access and control over healthcare data. Prioritise expanding data collection to include diverse populations to create more accurate and personalised healthcare solutions, tapping into untapped markets and improving overall population health.
Leverage AI for Operational Efficiency: Consider implementing AI-driven tools to enhance risk management, monitoring, and value creation within your portfolio companies. Ensure successful AI adoption by (i) implementing a robust governance structure which is compliant with the EU AI Act; and (ii) securing management buy-in.
Explore New Capital Sources and Exit Strategies: As a response to current liquidity challenges, many investors are considering diversifying their capital sources by targeting private credit and equity, retail wealth and other non-traditional investors. Additionally, consider exploring alternative exit options such as continuation vehicles to meet investors’ liquidity expectations and maximise value for stakeholders.