Private equity firms are positioned to secure some of their most favorable deals in the current market environment, driven by lower asset valuations and reduced competition, according to senior industry leaders. Dipan Patel, co-chief executive of Permira, a major UK-based buyout firm managing around €100 billion in assets, compared the current climate to post-dotcom crash and global financial crisis periods, which previously produced some of the best returns in private equity history.
Speaking at a recent private capital summit in London, Patel emphasized that the coming wave of investments, or “vintages,” could generate exceptional returns, especially for top-quartile funds actively deploying capital now. He noted that while private equity struggled in recent years due to high purchase valuations during an era of ultra-low interest rates, followed by difficulty in exiting holdings at attractive prices amid rising rates, the sector is better positioned today. “Being in a high-rate environment, eyes wide open, is not a problem for private equity because it translates into deal pricing,” Patel said.
John Reddett, co-president of Carlyle Group, highlighted how prolonged economic growth and abundant liquidity after the financial crisis fostered complacency and reliance on rising valuations rather than operational improvements. “People were generally benefitting from multiple expansion. They didn’t have to focus on value creation,” he explained. However, with less uncommitted capital available across funds, Reddett identified promising investment opportunities in areas such as defense companies and neglected units within large conglomerates.
Artificial intelligence (AI) is also expected to open new avenues for private equity investment, particularly in software sectors. Patel observed a shift from overcapitalization to underinvestment in software driven by AI innovations. He warned, however, that no industry is immune to AI disruption, cautioning investors against assuming that any sector will remain unaffected.
Nic Humphries, executive chair of software-focused buyout firm Hg, echoed this sentiment. He stressed the importance for firms to integrate AI technologies into their portfolio companies and build scalable internal AI capabilities to remain competitive. “People who do nothing — dead,” he said succinctly, underscoring the imperative for adaptation in the evolving technological landscape.
Overall, industry executives expressed optimism that the private equity sector, through disciplined deal-making and leveraging AI-driven opportunities, can deliver strong performance despite macroeconomic challenges.