The PE & CEO/CFO Report - Pivoting Into PE 3.0

Private equity entered 2025 on firmer footing, with deal activity bouncing back. Buyout investment value surged 37% year-over-year to $602 billion (excluding add-ons), while global exits climbed 34% to $468 billion.

This resurgence was driven by easing macro conditions and rate cuts, allowing firms to deploy capital more aggressively after years of caution. For the first time since 2015, distributions to LPs exceeded capital contributions.

Buyer-seller price mismatch continues to weigh down the industry, fundraising remains a grind and the disconnect between rising deal flow and constrained capital inflows means firms must navigate a more complex environment.

At the same time, the industry’s dynamics are rapidly shifting, with technology, alternative investment structures, and new sources of capital redefining how PE firms operate. GPs are adapting through strategic fund innovations, increased operational focus, and evolving value-creation strategies.

As happens in racing, when there is a major turn of any kind, racers bunch together, but once they exit that that turn, the winners quickly accelerate beyond the pack. While challenges persist, the top tier private equity firms are likely to emerge stronger, more resilient, and better positioned for the future.

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Here are our curated Private Equity CEO & CFO highlights for FEBRUARY 2025

• The Global Private Equity Report 2025 - Bain
• 15 Insights from Mckinsey's Global Private Markets Report 2025 - McKinsey
• Generative AI in Private Equity: Getting Real - Bain
• How Much Do PE CEOs Make? Who does PE hire as CEOs? - H&S
• 7-Insights from Pitchbook's 2025 PE Outlook - Pitchbook
• Where do CEOs Come From? The CEO Transition Report - Spencer Stuart
• Global Private Equity Report - Forvis Mazars

Enjoy this collection of PE CEO/CFO articles for February 2025. Please email me with errors, typos.

Global Private Equity Report 2025 - Ready for what’s next - Bain

Bain believes that Private equity is in a period of transition—while the market recovery is encouraging, firms must confront high valuations, liquidity constraints, and intensified competition. Success will depend on adaptability, AI-driven transformation, and a clear long-term strategy.

There are three large themes in the Bain report: Positive momentum, continuing challenges and the next horizon

Positive Momentum

• Investments are back in growth mode, delivering the 5th largest year ever, exceeding $600B in total enterprise value (TEV). Deal count also rose.
• Exit markets rebounded strongly to $470B, with notable growth in sponsor-to-sponsor activity.
• Exit returns remained strong, boosting confidence across the industry.

Continuing Challenges

• Valuations remain high, and in some markets, pricing is rising further.
• Liquidity remains tight—only 11% of LP NAV was returned in 2024, the lowest since the Global Financial Crisis, despite a stable economy.
• Fundraising dropped 23%, highlighting sustained LP caution. This will likely remain difficult through 2025 and beyond.

The Next Horizon

• Among the more interesting findings from Bain is that over the last decade, margin expansion has contributed just 6% of deal software deal value -- GPs must aggressively focus on cost efficiency and operating leverage to drive returns.
• AI adoption is accelerating, with PE firms deploying it effectively for investment decisions, back-office productivity, and portfolio value creation. (see below)
• The industry is at an inflection point, with heightened competition for talent, investment opportunities, and capital sources. Consolidation is increasing, and fundraising declines will have lasting effects.
• Strategy matters more than ever—GPs must define their five-year ambition, addressing scale, alpha generation, and optimal investment mix. LPs are demanding clarity.

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15 Insights from McKinsey's Global Private Equity Report: Adapting to the New Normal - McKinsey

McKinsey finds that while the PE industry has been shaken up it's adapting through innovative strategies and capitalizing on improved market conditions.

It highlights a rebound in private equity after a challenging period, with global deal value rising 14% to $2 trillion—one of the highest levels on record. Notably, distributions to LPs exceeded contributions for the first time since 2015, signaling renewed liquidity.

Fundraising remains tough, but 30% of LPs plan to increase allocations in the next year.

To adapt, GPs are diversifying capital sources, increasing reliance on separately managed accounts, co-investments, and high-net-worth investors. This shift has driven a multitrillion-dollar expansion in PE assets under management.

Additionally, firms are leveraging strategic innovations to attract capital while benefiting from an improving macroeconomic environment. Here are 15 insights from their report:

• Dealmakers: Bouncing Back, Especially at the Top – Private equity deal activity rebounded in 2024, with a significant increase in deal value, particularly in large buyouts.
• Venture Capital’s Continued Crunch – Venture capital saw a continued decline in deal count, struggling more than other private equity sub-asset classes.
• Bigger is Back – Large buyout transactions surged, with deals over $500 million seeing significant growth in both value and count.
• Long-Term Trends in Sector Allocation Persist – Technology and financial services dominated private equity investments, while healthcare continued to retreat.
• Public Companies Are Becoming More Attractive – Public-to-private (P2P) transactions increased, particularly in Europe, as sponsors sought undervalued companies.
• Private Equity Portfolios Are Getting Older – The backlog of unsold assets has reached its highest level in decades, extending average holding periods.
• IPOs Remain Tough – Sponsor-to-sponsor exits increased, but IPOs continued to struggle as an attractive exit route for private equity firms.
• Fundraisers: Enduring Pressure, but the Outlook is Bright – Fundraising remained challenging, with LPs cautious about committing new capital despite increasing allocations to private equity.
• Midmarket Fundraising Appears More Resilient – While overall fundraising declined, midmarket funds ($1B-$5B) proved more resilient, attracting stable investor interest.
• LPs Have Become Part of the Liquidity Solution – The secondary market reached record highs as LPs actively traded fund stakes and embraced GP-led secondaries.
• Operators: The Value Creation Imperative Endures – With multiple expansion no longer a reliable driver of returns, GPs are focusing more on operational improvements.
• M&A Remains a Key Enabler of Returns – Add-on acquisitions are gaining momentum, with sponsors using M&A as a tool for value creation and portfolio growth.
• Organic Cash Generation is Key to Managing Leverage – Rising interest rates and financing costs make cash flow optimization critical for portfolio companies.
• Portfolio Companies Are Taking the Lead on Exits – Companies are investing in operational improvements and market studies to enhance their exit readiness and valuation.

Generative AI in Private Equity: Getting Real - Bain

Year two of generative AI in private equity is less about hype and more about results. Bain found that nearly 20% of portfolio companies are already seeing impact from AI-driven use cases—a rapid shift for such a young technology. While most firms are still in test mode, the ones making real progress aren’t waiting for the perfect playbook. They’re committing capital, embedding AI expertise across their firms, and taking a hands-on approach to adoption. AI isn’t just an experiment—it’s becoming a performance lever.

The firms at the vanguard share a simple mindset: action over analysis.

• Vista Equity Partners is all in, requiring AI-driven targets from its 85+ portfolio companies and driving adoption with internal experts, CEO councils, and hackathons that turn ideas into real products.
• Apollo is pushing AI through a Center of Excellence, connecting portfolio teams with top-tier specialists to move from concept to execution.
• Hg is using AI to modernize software, streamline operations, and drive productivity across its portfolio.

The common thread? AI isn’t the strategy—it’s a tool to sharpen the edge. The firms at the front in this space are moving fast, aligning AI with business priorities, and ensuring their teams are structured to execute, not just explore.

How Much Do PE CEOs Make? - H&S

The H&S survey of PE CEOs found that PE CEOs were men (95%), had 10 years of experience or less (65%), spent 8.6 years working in PE, sat on their boards (88%) and were hired for either value creation or as a successor (70%).

On average, US CEOs make $900-thousand in cash and will realize $11-million on exit.

7-Insights from Pitchbook's 2025 PE Outlook - Pitchbook

• Smaller Deal Types Prevail – Private equity firms are increasingly focusing on smaller deals, as mid-market transactions and add-ons remain more viable in the current market environment.
• Divestitures as a Value Creation Strategy – PE firms are leveraging divestitures to optimize portfolios, unlock value, and streamline operations within portfolio companies.
• Exits Are Up 50% in Value and 17% in Deal Count – Private equity exit activity surged, with total exit value rising by 50% and deal count increasing by 17%, signaling improved liquidity and stronger market conditions.
• Large Backlog of PE-Backed Companies Awaiting Exit – A significant number of private equity-owned companies remain in portfolios longer than expected, creating pressure for GPs to find viable exit opportunities.
• Deployment Has Increased – Private equity firms have ramped up capital deployment, taking advantage of improving financing conditions and growing investor confidence.
• PE-Backed IPOs Capture 40% of U.S. IPO Capital – PE-backed companies accounted for 40% of total U.S. IPO proceeds, underscoring private equity’s continued influence in public markets.
• Public Market Multiples Exceed Private Deal Multiples – Valuations in public markets remain higher than private equity deal multiples, creating challenges for PE firms looking to exit at attractive prices.

Where do CEOs Come from? The CEO Transition Report - Spencer Stuart

CEO transitions ticked up slightly in 2024 but still haven’t returned to pre-pandemic levels. Mid- and small-cap companies leaned heavily on experienced leadership, bringing in more external hires and former public company CEOs. In industries with divisional structures, the divisional CEO role became a prime stepping stone to the top job. And in a long-overdue shift, women hit a record 16% of all incoming S&P 1500 CEOs—still too low, but progress.

Global Private Equity Report - Forvis Mazars

Forvis Mazars' Global Private Equity Report 2025 underscores the industry's resilience amid economic volatility and highlights strategic shifts adopted by PE firms to drive value creation.

Key Trends in the U.S. Private Equity Market

1. Economic Factors Driving Strategic Changes: U.S.-based PE firms are adapting investment strategies to align with prevailing market conditions, demonstrating agility in navigating economic uncertainties
2. Preference for Mid-Market Funds and Add-On Deals: There's a noticeable shift towards mid-market funds and add-on acquisitions, reflecting a strategic focus on scalable growth opportunities within this segment.
3. Prioritization of Operational Value Creation: Firms are emphasizing operational enhancements to foster growth, leveraging their capacity to drive value despite market fluctuations.
4. Navigating Regulatory and Geopolitical Challenges: PE firms are proactively addressing the complexities of an unpredictable regulatory and geopolitical environment, incorporating these considerations into their strategic planning.

That's all for this month, email me at [email protected] with questions.

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