Report Contents
- Private Equity Market Update
- Solomon Business Services Group Spotlight
- Campbell Lutyens Q&A
Highlights
Private Equity Snapshot
“The market will remain challenged, with exit volumes tracking in line with FY’24. Still, there are pockets of activity in sectors showing strong operational fundamentals and resilience to tariff headwinds, particularly services and technology. For the broader market, easing interest rates and a reopening IPO market should provide tailwinds, sustaining and eventually accelerating sponsors exits…”
Sash Rentala, Head of Financial Sponsors
Discerning Market with Potential Tailwinds
Pockets of strength: Services and Technology continue to drive deal-related activity, contributing to ~74% of U.S. PE deals as of Jun’25 YTD. Strong fundamentals and resilience to tariff headwinds make them priority sectors for private equity investments.
Exit momentum eased in 2Q25: Despite 2Q25 exits growing 13% YoY, exit activity slowed sharply QoQ (25%), signaling a pause after a strong start to the year.
Debt markets remain tight: With Fed rates having stayed higher for longer (recent cut announced in September), sponsors have faced challenges securing financing. U.S. BSL deals show debt / EBITDA ratios 0.6x below pre-pandemic norms.
Cautious optimism for 2H25: U.S. dry powder continues sustained double-digit growth, with ~$1T ready to deploy. Combined with a mounting backlog of sponsor-held assets, this could set the stage for a significant wave of potential exits in the coming years.
Top Trends Shaping Private Equity
Challenged macro environment: Fed faces growing pressure to cut rates as the labor market softens with just 22k jobs added in August (vs. ~75k expected) and unemployment rising to 4.3%, signaling weaker hiring amid tariff headwinds and declining consumer demand.
Secondaries creating a path for exit: With traditional exits muted, the secondary markets have opened as a viable exit path, giving GPs the ability to retain & grow winning assets and LPs flexible liquidity options.
Fundraising under pressure: Fundraising is down for the third consecutive year; a recovery in exits and general improvement in the macro environment is expected to help fundraising recover beyond ‘25.
Key PE Themes from our Business Services Group
Quality assets: High-quality platforms are attracting strong interest from financial sponsors that are beginning to act more aggressively, while deal flow and completed transactions have increased substantially in August / September.
Buyer and seller dynamics: Valuations, leverage, interest levels and “aggressive” buyer behavior near peak levels for high quality businesses operating in “in demand” sectors.
Anticipated dealmaking: Deal activity is expected to continue accelerating through year end driven by a backlog of engaged transactions, a need for sellers to generate DPI after limited exits, easing interest rates, and solid business performance.
