Navigating Increased Financial Sponsor Activity in 2025
Nixon Peabody LLP
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Financial sponsor activity is expected to increase as 2025 continues, especially in sell-side transactions and take-private deals.
The past three years have seen lower M&A activity due to a slew of well-known factors: borrowing costs have markedly increased due to higher interest rates, pricing expectations between buyers and sellers remain misaligned following a red-hot sell-side market earlier this decade, and operational challenges like employee turnover and regulatory uncertainty abound.
Financial sponsors have delayed their sell-side exit events as a result, creating an excess of aging private-equity-owned assets. Financial sponsors are thus under increasing pressure to sell and return capital to investors, which we expect to manifest in a notable increase in M&A activity.
Notwithstanding the significant uptick in older assets—and with trillions in uncommitted capital—financial sponsors and their investors are always looking for the next big return.
Take-private acquisitions have gained popularity over the last 18 or so months as a result. Attractive public assets like Smartsheet, Squarespace, and Rover entered into take-private acquisitions last year, as did dozens of other public companies, often due to multi-sponsor buyer teams banding together.
Our general takeaway is that financial sponsors will be very busy this year, maximizing the value of assets that need to be sold quickly and reinvesting that capital as soon as possible (via both public and private acquisitions) as they begin to form new funds.
Financial sponsors can best achieve these goals through:
Our team has extensive experience working with financial sponsors to think through each of these critical considerations.
Our weekly newsletter is published to share updates and insights from part of our team of Private Equity and M&A legal talent. This edition is curated by Rachel Pugliese .
Insights
Working capital purchase price adjustments (PPAs) have become nearly ubiquitous—present in more than 90% of private-target M&A transactions today, up from 50% just a decade ago. What is behind this shift? What other PPA trends are emerging?
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The 2025 SRS Acquiom M&A Working Capital Purchase Price Adjustment Study analyzes more than 1,200 private-target acquisitions, most of which are not publicly reported.
The new presidential administration promises to significantly change federal rules and policies governing business operations, and clients must proactively prepare to implement these changes.
We’re monitoring federal developments and providing insights to help our clients navigate these transitions. Our deep industry knowledge informs how we offer practical guidance during periods of rapid change. As new policy initiatives reshape “business as usual,” we deliver strategic advice to help clients maximize opportunities for growth and profit while prioritizing compliance and risk management.
CTA Reporting Requirements Remain on Hold
Corporate Transparency Act (CTA) reporting is voluntary and not required at this time, but this may change depending on the outcome of the lawsuits currently making their way through the courts. Nixon Peabody will continue to monitor these cases and will let you know as things develop.
As we step into 2025, the healthcare transaction landscape is poised for significant shifts. Nixon Peabody and BDO recently co-hosted a webinar to discuss the headwinds and tailwinds shaping healthcare transactions.
Upcoming Events
Private Equity Investments in Healthcare Practices: February 12, Webinar
Hot Topics in the Middle Market: 2025 Landscape: February 25, Boston
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