Private Equity Shifts to Add-On Strategy as Market Rebounds for 2025

What's New: Private equity firms are pivoting from large platform acquisitions to strategic add-on deals and operational improvements as the market prepares for strong performance in 2025, supported by record uninvested capital and increasing asset availability, according to Baker McKenzie's analysis of private equity trends.

Why It Matters: This strategic shift demonstrates private equity's adaptability in creating value beyond headline-grabbing deals, focusing instead on buying down investment multiples, seamless integration, and building robust platforms that can deliver superior returns despite challenging market conditions.

Big Picture Drivers:

• Capital availability: Record levels of uninvested funds are pushing firms to find innovative deployment strategies while private equity funds look to exit older investments.

• Interest rates: Higher borrowing costs have created a temporary standoff between buyers and sellers, making debt-heavy acquisitions less attractive.

• Regulatory landscape: Current compliance hurdles around interlocking directorships and antitrust concerns are expected to ease in 2025, potentially streamlining deal processes.

• Integration expertise: Successful add-on strategies rely heavily on operational partners skilled in relevant industries to manage complex integrations and identify new value sources.

• Global expansion: Cross-border growth introduces additional challenges from local regulations to geopolitical shifts, making adaptability increasingly valuable.

By The Numbers:

• 2025: Year experts project accelerated deal flow activity

• Multiple add-ons now form primary strategy to strengthen platforms

• 3+ years: Extended holding periods becoming more common

• 70%+ of transactions now involve smaller strategic acquisitions rather than large platform deals

• $1+ trillion in estimated dry powder seeking investment opportunities

Key Trends to Watch:

• Seller adjustment will continue as more assets come to market from sponsors seeking exits from post-COVID deals and corporates divesting non-core businesses.

• Antitrust planning becomes increasingly critical as buy-and-build strategies expand firms' market footprints within specific sectors.

• Operational integration challenges will separate successful private equity firms as portfolio company management must balance new systems and personnel while maintaining customer relationships.

• Cross-border complexity will require specialized local expertise in navigating regulations around national security, tariffs, and data privacy.

The Wrap: Private equity's proven ability to adapt remains its greatest strength as the industry enters 2025 with optimism despite recent challenges. Firms that can execute disciplined add-on strategies, navigate regulatory hurdles, and create operational synergies through seamless integration will define the next phase of growth.