Press Release
PE firms plan to boost investment levels in 2025, despite finance and geopolitical stability concerns
11 Mar 2025
New research from leading business and financial adviser Grant Thornton UK LLP finds that over two thirds (67%) of private equity firms internationally expect to boost their investment levels this year, despite concerns about the availability of finance and geopolitical stability.
The firm’s first Private Equity Pulse*, which surveyed 200 private equity (PE) leaders from across the UK, USA, EMEA and APAC, explores the industry’s outlook for the year ahead. It finds that, overall, the industry is relatively optimistic. Over two thirds (67%) of respondents expect to increase their investment levels over the next 12 months, with the majority expecting to increase spending by up to 25%. The average investment size looking to be targeted by all the firms surveyed is between $50million - $100million. Respondents from UK firms are found to be less optimistic than the average however, with a 50:50 split between those expecting to increase or decrease their investment levels.
While many firms are optimistic about their outlook this year, challenges remain in the market and concerns around the ‘availability of finance’ and ‘geopolitical stability’ are noted as the biggest anticipated barriers to growth for PE firms internationally.
Commenting on the findings, Peter Terry, Head of Private Equity, Grant Thornton UK LLP, said:
“While, overall, outlook for PE activity this year is positive, an uncertain operating environment has continued into 2025 for many. Speculation around changes to US trade tariffs and the ongoing conflict in Ukraine mean concerns around the impact of geopolitical stability, availability of finance and the economic climate are high. But many firms do intend to quite significantly increase their investment levels this year. Cheaper debt is expected to boost deal numbers and we’ve seen a re-alignment of price expectations between sellers and PE firms, which will also likely drive further activity over the next 12 months.
“But UK firms are found to be less optimistic and their confidence may have been impacted by a new government agenda and policy announcements in last year’s Autumn Budget. Changes to employers’ NI contributions and NI thresholds are anticipated to have a knock-on impact on business growth, therefore extending the timeframe for bringing companies to market.”
Financial services and North American companies identified as PE ‘hot spots’ this year
With many PE firms looking to boost their investment levels in 2025, the following sectors are identified as having the most investment potential over the next 12 months:
- Financial Services
- HR and recruitment / Technology
- Sustainability
Geographically, North America is the top region that PE firms are looking to target for new investments – led predominantly by respondents from the UK and USA - followed by Europe, while the UK ranked 4th. Respondents from UK PE firms specifically noted domestic interest with the UK topping the list, followed by North America and Asia-Pacific.
Overall, the research finds that the biggest drivers behind dealmaking in 2025 are expected to be a ‘greater availability of debt financing’, ‘decline in valuation / sellers expectations’ and an ‘increased volume of assets coming to the market’.
The research also finds that the majority (68%) of all respondents believe that specialist impact funds are now becoming outdated due to the widespread adoption of impact investing practices. In fact, almost three quarters (74%) reported that ESG is now an integral part of their investment strategy, with ‘regulatory compliance’ the primary motivator behind this. This was followed by ‘ethical considerations’ and ‘risk management’.
Peter Terry, added:
“The financial services sector and people-focused industries such as HR and professional services have emerged as high-potential investment targets for PE firms for the year ahead. The financial services sector is particularly attractive due to its robust fundamentals, including predictable cash flows, potential for digital transformation, and opportunities for consolidation. The market demand for talent and professional services companies is on the rise globally and in the UK, driven by evolving workforce dynamics, economic shifts, and skills gaps in core areas making them a particularly attractive investment area. Alongside this we anticipate a strong level of activity in the broader people and talent arena, encompassing training, development, and talent consulting companies, as employers focus on developing and retaining key staff.
“The last twenty years has seen the emergence of private equity funds dedicated to aligning financial returns with social and environmental impact, but our research suggests that the now widespread adoption of ESG principles means that there is no longer a need for specialists. While regulatory compliance is found to be the most common motivator behind ESG focus, this is not to say ESG efforts are simply a hygiene factor, as ethical considerations were the second most popular motivator.
“It’s clear from our research and our own work with clients that appetite for investment is there among the PE market and many are optimistic about their outlook for the next 12 months. Cost pressures in the market may just mean that it might take that little bit longer for the PE deal floodgates to open this year.”
*Censuswide, on behalf of Grant Thornton UK LLP, surveyed 200 respondents - including investment directors, managers, and originators - in Private Equity firms across the UK, USA, EMEA and APAC (50 respondents in each region). Interviews were conducted between 27.11.2024 and 23.12.2024.
