Navigating Private Equity’s New Reality-What Executives Need to Know Now

If you’ve felt a shift in private equity energy this spring, you’re not alone. The first quarter of 2025 has delivered a complex mix of challenge and opportunity for PE leaders and portfolio company executives alike. As someone who’s coached through multiple market cycles, I can tell you: this is one of those moments where adaptability, clarity, and behavioral intelligence matter more than ever.

The State of Private Equity: Fewer Exits, Bigger Deals, and a Spotlight on Value Creation

Let’s start with the headlines. Private equity exits in Q1 2025 have fallen to a two-year low, with just 473 exits totaling $80.8 billion-reflecting a market where the IPO window is, for now, largely closed and strategic sales are the main path to liquidity. Deal count has dropped to its lowest since early-pandemic days, but here’s the twist: deal value is up, thanks to a surge in $1 billion-plus transactions and a greater share of large, strategic deals.

Fundraising remains challenging, with capital raised falling for a third consecutive quarter, but dry powder is still abundant-nearly $1 trillion is waiting to be deployed in the U.S. alone. Meanwhile, the average LBO purchase price multiple ticked up to 11.7x in Q1, indicating that buyers are still willing to pay for quality, even as they scrutinize risk more carefully than ever.

Why the Slowdown? Uncertainty, Tariffs, and a New Administration

What’s driving this shift? In a word: uncertainty. Tariffs, supply chain disruptions, stubbornly high interest rates, and regulatory unknowns have all contributed to a “wait-and-see” approach for many PE firms. The introduction of new tariffs and market volatility has hit manufacturing, industrials, and consumer goods especially hard, making exits in these sectors more complicated and less attractive.

It’s not all doom and gloom, though. Sectors less exposed to tariffs and global supply chain risk-think tech, healthcare, and specialized services-are still seeing active deal flow and strategic exits.

The Strategic Pivot: From Exits to Value Creation

With traditional exit windows narrowed, leading PE firms are pivoting to value creation. That means:

- Operational improvements: Maximizing EBITDA margins, optimizing costs, and investing in digital transformation.

- Bolt-on acquisitions: Buying smaller, synergistic companies at attractive valuations to boost long-term value.

- Partial or structured exits: Considering dividend recapitalizations, minority sales, or spin-offs to continuation funds as alternative liquidity paths.

- Risk repositioning: Reducing geographic or regulatory exposure and pivoting portfolio companies toward more resilient sectors.

This is a time for proactive leadership, not passive waiting. The firms that use this period to strengthen their portfolio companies-operationally, culturally, and strategically-will be best positioned when the exit window reopens.

What Does This Mean for Executives and Leaders?

If you’re leading a PE-backed company, the message is clear: value creation is your mandate. The spotlight is on your ability to drive operational excellence, manage risk, and lead your team through uncertainty.

Here’s where behavioral intelligence comes in. In times of volatility, your team’s ability to adapt, communicate, and execute with clarity is your greatest asset. Leaders who can foster psychological safety, encourage candid dialogue, and align teams around new goals will outperform those who simply react to market forces.

Keri’s Call to Action

Ask yourself:

- Are you proactively identifying operational improvements, or waiting for direction from above?

- How are you communicating uncertainty to your team? Are you fostering resilience or fueling anxiety?

- What steps are you taking to position your company for value creation-even if a traditional exit isn’t on the immediate horizon?

If you’re ready to turn this period of uncertainty into a launchpad for future growth, now is the time to invest in your leadership team’s behavioral intelligence. Our BiQ assessment and executive coaching programs are designed to help leaders like you navigate complexity, drive value, and prepare for whatever comes next.

Let’s turn today’s challenges into tomorrow’s opportunities-together.

Keri Laine

Founder & CEO

Keri Laine Executive Solutions

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Want to discuss how behavioral intelligence can help your team create value in this new PE landscape? Reply to this newsletter or schedule a consultation by emailing keri@kerilaine.com.

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