Leading indicators point to a more active private equity environment in 2025. The sector, like its traditional counterparts, has struggled with low deal volume, delayed exits, and slow fundraising cycles over the last few years.
There was a glimmer of hope in 2024, as private equity activity was at its strongest in two years and experienced the highest level of capital deployment since 2022. According to a McKinsey report, global PE dealmaking rose 14% to $2 trillion, making 2024 the third-most-active year on record for the asset class.
Building on this uptrend, 2025 is expected to bring a continuation of activity in the private equity space, driven in part by advancements in AI and generative AI technologies, investment in digital infrastructure, a warm-up in dealmaking and exits, and a focused shift to specialization and value add.
Leveraging top expert insights from the AlphaSense platform, we explore the key themes and trends driving momentum in the PE space in 2025.
AI Enterprise Adoption and Integration
Beyond discovery, private equity managers have shifted their sights to AI integration across their enterprises and developing the best, highest-value use cases for their teams. An example of this is the ability to streamline and simplify complex documents and data to extract timely, relevant insights.
In an expert interview sourced from the AlphaSense platform, the CEO and co-founder of a legal tech company discussed the ways AI is enhancing due diligence in the PE space:
“Increasingly, we have clientele in the financial services space, private equity and they’re looking to do, for example, due diligence on documents using AI. In particular, those types of due diligence activities are looking at various document types. You might be looking at a contract. You might be looking at an Excel spreadsheet with a financial model, a P&L, what have you. What I would see as an opportunity for them is just to improve the ways that they represent that information.”
While impressive efficiencies have been realized already, a former PE analyst believes the industry is on the cusp of AI transformation:
“There’s a lot of decisions that happen at private equity firms. The smallest decision that we’re currently handling is this piece of PDF paper or a balance sheet or investment schedule. That’s fine, that’s good, that’s easy. That creates efficiency. I think to really get a new understanding is a little more built on top of what’s already there, like forecasting or just some scenario analysis. I think that would be interesting to see in the next few years.”
AI Investments and Strategy
With high levels of dry powder anticipated to continue declining this year, investment in the technology, real estate, and healthcare sectors is expected. The rising interest in data center investments supports the property needs associated with housing infrastructure and equipment to further advancements in AI and broaden integration.
A former VP at Blackstone believes data centers are a long-term investment “theme” particularly among some of the larger players:
“We talked about data centers and some of the technology investments. Those are extremely high-growth areas of the market and so on and so forth. I’d say that you can expect some continuation of the themes that already Blackstone’s been very public about investing in with regards to data centers, with regards to logistics. I think when Blackstone makes some of these bets, it really is thinking very long-term in nature.”
A managing director at an RIA believes PE managers are becoming increasingly strategic in structuring their AI strategies, citing an instance of an Apollo partner collaborating with VC influencers to access the “bolt of innovation from these early stage and mid-stage companies that only these types of firms have access to.” The expert notes these types of partnerships are synergistic as tech portfolio companies lean on PE firms such as Apollo for “nondilutive financing.”
Focus on Specialization and Value Add
A recent McKinsey Global Private Markets report identifies value creation as an evergreen principle critical to driving returns. The report also covers trends that are shaping value creation in the space, including expanded operating groups, the popularity of add-on M&A deals, disciplined cash management, and portfolio companies taking a leading role in exits.
A former managing director at Goldman Sachs reiterated the focus on specialization and value-add in an expert interview sourced from the AlphaSense platform:
“I think as you go forward, the whole idea of value creation is going to become even more important because that’s really where the, call it differentiation comes in. Capital is capital. A company if they want to raise money can get that from anywhere, but in order to generate those returns, you need to know what you’re going to do with that business after so value creation increasingly becomes important. If you look at where the industry is today, I think things are starting to unlock. There’s a little bit more certainty with the environment. Inflation seems to be improving.”
A Warm-Up for Dealmaking
A query within AlphaSense’s Generative Search tool suggests that dealmaking in the PE space could reach “near-record levels of activity” in 2025. Beyond AI infrastructure, experts anticipate expanded dealmaking efforts in the fiber network market. A former VP at AT&T expects heightened interest in this market for the foreseeable future:
“..There’s a fair amount of money, private equity money that’s chasing fiber build-outs. With the B funding coming in, I fully expect that in 2025, 2026, and 2027, as that money gets deployed, you’re going to start seeing a lot of smaller players build out fiber all over the place.”
For a look back at last year’s trends, check out Private Equity Trends and Outlook for 2024.
Barb is a Financial Research Leader covering the financial services segment at AlphaSense. Previously, she spent more than a decade at institutional investment managers and at a SaaS startup leading business development, content, and product initiatives.
Read all posts written by Barbara Tague
