Private Equity Navigates Volatility Amid Economic Uncertainty

Editor
Apr 20
2 min read

What's New

PitchBook's Q1 2025 US PE Breakdown reveals robust dealmaking despite growing economic concerns, with Q1 deal value reaching $259.7 billion, up 24.6% QoQ and 36.1% YoY. Deal count remained steady at 2,263, though exits are struggling to keep pace with the massive backlog of 3,800 PE-backed companies awaiting liquidity.

Why It Matters

PE firms are walking a tightrope between capitalizing on opportunities and protecting against emerging risks from tariffs, federal spending cuts, and weakening consumer credit. With $1 trillion in dry powder and $566.8 billion in private credit, the industry is well-positioned to weather volatility, but exit conditions will determine whether the recovery continues.

Big Picture Drivers

Sentiment has sharply deteriorated, with 60% of CFOs now expecting a recession in H2 2025, up from just 7% last quarter.
Tariffs are creating significant headwinds for portfolio companies, particularly in B2B (39.4% of inventory) and B2C (19%) sectors with high import exposure.
Take-privates are regaining momentum, highlighted by Sycamore's $23.7 billion acquisition of Walgreens Boots Alliance—the largest healthcare take-private since the financial crisis.
Technology remains resilient despite macroeconomic concerns, comprising 18.3% of total PE deal count and 24% of deal value.
IPOs show signs of life with seven completed in Q1 for $76.5 billion, already exceeding full-year 2024 exit value through public listings.

By The Numbers

$259.7B in Q1 2025 deal value, up 36.1% year-over-year
2,263 deals completed in Q1, up 11.8% from Q1 2024
12.2x median EV/EBITDA multiple, down slightly from 12.7x in 2024 but well above pre-pandemic levels
$1 trillion+ in available PE dry powder to deploy
74.9% of buyouts were add-ons, reflecting continued focus on platform building

Key Trends to Watch

Exit backlog will create pressure as 3,800 portfolio companies have been held for 5-12 years, testing GPs' ability to return capital to investors.
Continuation funds are becoming more prominent as firms seek alternatives to traditional exits, with 19 such transactions in Q1 following 99 in full-year 2024.
Corporate acquisitions represented 68.3% of Q1 exit value (excluding IPOs), but uncertainty around tariffs and policy changes may slow this exit channel.
Fundraising headwinds persist with only $56.7 billion raised across 79 funds in Q1, continuing the slowdown trend from 2024.

The Wrap

The PE industry faces a pivotal moment as macro uncertainty tests its operational acumen. Firms with innovation in supply chain optimization and strategic pricing will gain advantage. While short-term NAV markdowns may occur, 2025 could offer attractive entry points for new capital, especially in sectors facing dislocations where PE's longer investment horizons provide an edge over public markets.