Since the COVID bubble burst, companies have adapted to decreased demand and spikes in interest rates and inflation. Conditions have improved over the last several months, but looming pre-election uncertainty tempered optimism and caused many businesses to take a “wait and see” approach, affecting 2025 deal market trends. For private equity firms, there is concern about policy changes that could reignite economic volatility, negatively impact portfolio company performance and hinder access to financing.
The result? PE firms have continued to “wait-and-see”, holding their capital until the economic outlook is clearer post-election. According to S&P Global, private equity is experiencing “the longest holding periods in 2 decades”. Market Intelligence reported that just the 25 private equity and venture capital firms with the largest stores of dry powder are collectively sitting on an unprecedented $556.19 billion of uncommitted capital.
While firms may have delayed dealmaking, operating partners and portfolio companies have been busy with performance improvement. One lever that’s received a lot of attention is artificial intelligence.
“GPs are acutely aware of the need to consider AI-related disruption to business models, products and services, and even entire industries, when weighing up deal targets and managing their portfolios.”
-PEI Report
Forward-looking companies are already using the mountains of data they’ve collected for AI-driven customer service, demand forecasting, personalized marketing, product recommendations and supply chain optimization. Even industries like manufacturing and transportation that have traditionally been late adopters are trialing predictive maintenance, route optimization and robotic process automation. Deal teams should also take note: AI is undoubtedly still in its early stages, but experimentation is accelerating. Investments in the AI space represent one of the biggest 2025 deal market trends and opportunities for growth.
Looking Forward: 2025 Deal Market Trends
The wait is over. In 2025, the uncertainty dam will burst. PE firms will finally have the opportunity to unload assets that were held too long, return capital to LPs and deploy mountains of dry powder. The coming year will be a time of frenzied buying and selling as private equity firms look forward to a clearer economic outlook and a more favorable deal-making environment.
As the pace of deal making accelerates, firms that can perform faster and more robust due diligence – both sell- and buy-side – will make the best deals. Leveraging advances in technology like AI to speed up due diligence without sacrificing the integrity of the process will give the most innovative firms an edge.
But AI isn’t uniquely affecting PE firms. Existing assets and potential targets are all implicated so it’s critical for deal teams to understand the broader impacts of AI. On the sell side, it will be important to explain how a portfolio company is experimenting with AI to gain market advantage and create efficiencies. On the buy side, it will be critical to know how AI is likely to impact a target’s industry, be able to gauge a target’s readiness for that impact and incorporate those insights into valuations.
Conclusion
Post-election, PE firms can look forward to a tidal wave of opportunities in 2025. Private Equity needs to brace for impact and be ready to move quickly. Deal teams that understand and embrace AI’s wide-ranging possibilities will be able to take advantage of this fast-moving technology and set themselves up for long-term success.
How RKON Can Help
Gaining Certainty in an Uncertain Time
As private equity firms gear up for the wave of activity in the new year and try to stay ahead of the 2025 deal market trends, leveraging technology is one key to coming out on top. With all-time high levels of dry powder, private equity firms that thoughtfully integrate an AI strategy for faster and more accurate decision-making will gain a competitive edge in the market.
RKON empowers deal teams with cutting-edge AI solutions that offer a rapid approach to deal sourcing by analyzing vast amounts of data, allowing firms to identify high-potential acquisition targets more efficiently. RKON has a proven track record of creating AI solutions that enhance the due diligence process by swiftly analyzing key insights, reducing the time needed to assess a target company’s performance and understand potential synergies.
At the portfolio level, RKON’s AI solutions go beyond automating administrative tasks; they optimize key operational processes, enhancing supply chain efficiency, improving demand forecasting, and implementing inventory management for maximum impact. When leveraged effectively, our AI tools can also give market-facing companies a significant edge by delivering personalized customer service through chatbots, aid in product and service innovation, and provide personalized product recommendations and pricing.
From a development perspective, RKON builds new solutions for portfolio companies that create operational efficiencies, improve customer experience and enhance employee productivity. From an infrastructure hosting standpoint, RKON’s DevOps team designs the cloud-based environments that host the newly developed solutions and provides managed services to support these scalable and reliable environments on an ongoing basis.
At RKON, we are an extension of your deal team. RKON’s advisory approach is grounded in 20 years of full-service offerings, from buy-side and sell-side IT & cyber due diligence to AI solutions for deal teams and operating partners. We build technology solutions for private equity.
Ready to stay ahead of the 2025 deal market trends? Let’s navigate the complicated deal market together, talk to an expert today.
