Infrastructure Investment Outlook: Private Equity's Growing Role in Building America's Future

The infrastructure sector stands at a critical juncture as we move into 2025. A recent American Investment Council (AIC) report highlights how private equity is driving investments in America's infrastructure and improving local communities, with some remarkable trends that signal strong continued growth in this sector.

Current State of Infrastructure Investment

The scale of infrastructure investment needed in the US is staggering - approximately $12 trillion by 2040, according to Oxford Economics. Private equity firms are stepping up to meet this challenge, with Boston Consulting Group estimating that infrastructure AUM grew by $700 billion from 2018 to 2023, achieving an impressive 18% CAGR.

Key areas of focus include:

Digital Infrastructure: Major investments in datacenters and connectivity, exemplified by recent deals like BlackRock and Microsoft's $100 billion AI infrastructure partnership

Housing Development: Addressing the 4.5-million-unit home shortage through innovative build-to-rent projects and construction technology investments

Energy Transition: Balanced investments in both renewable energy and traditional infrastructure, with PE firms increasingly backing projects that combine both sectors

Notable 2024 Trends

The AIC report reveals several significant trends that shaped infrastructure investment throughout 2024. Construction and engineering emerged as a particularly active sector, with 140 deals completed totaling $7.7 billion in value. The digital transformation of infrastructure continued at pace, with IT services and digital infrastructure showing remarkable resilience through 192 completed deals. In the energy sector, a notable shift occurred as investments in renewable energy equipment reached record proportions relative to traditional energy infrastructure. Perhaps most significantly, the industry maintained substantial investment capacity, with infrastructure dry powder reaching $99.7 billion by year-end, positioning the sector for continued growth.

Our 2025 Infrastructure M&A Forecast

Looking ahead, we anticipate several key developments in infrastructure M&A for 2025:

1. Accelerated Digital Infrastructure Consolidation

- Expect increased datacenter M&A activity driven by AI computing demands

- Smaller regional fiber network operators likely to consolidate

- 5G infrastructure buildout will drive telecom tower M&A

2. Energy Transition Deals

- Continued hybrid deals combining traditional and renewable energy assets

- Battery storage and grid modernization projects will attract significant PE interest

- Expected increase in energy efficiency technology acquisitions

3. Construction Technology

- Surge in construction tech platform acquisitions as the sector digitizes

- Modular construction companies likely to see increased M&A activity

- Building materials technology firms focusing on sustainability will be prime targets

Investment Implications

The infrastructure sector is poised for significant deal activity in 2025, driven by several converging factors. The expected stabilization of interest rates should provide a more predictable environment for deal-making, while record levels of dry powder, with $99.7 billion dedicated specifically to infrastructure, ensures ample capital for new investments. This financial capacity is further enhanced by the growing prevalence of public-private partnerships, which are creating innovative funding structures for major projects. Additionally, the urgent need for infrastructure modernization across the United States continues to create compelling investment opportunities.

For strategic buyers and investors, success in this environment will depend on identifying assets that can achieve multiple objectives simultaneously. The most attractive opportunities will be those that can benefit from both technological advancement and the ongoing energy transition while maintaining stable cash flows, which is a challenging but achievable balance in today's market.

Looking Forward

As we move into 2025, infrastructure investment opportunities appear abundant, particularly in sectors where technology and traditional infrastructure converge. The successful deployment of the significant dry powder accumulated by PE firms will have an impact on America's infrastructure for decades to come.

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This analysis is provided by Align Business Advisory Services, based on data from the American Investment Council's December 2024 report "Building America's Infrastructure: How Private Equity Improves Local Communities" and our internal research.