Tariffs, Policy Uncertainty Cloud Private Equity Dealmakers’ Outlook — Evening Brief – 04.08.25
Tariffs and policy uncertainty have dimmed private equity (PE) dealmakers’ short-term confidence in middle-market transactions, per the 2025 Middle-Market Private Equity Report by law firm Katten. While December’s survey of 110 executives painted an upbeat picture, a flash survey last month revealed a shift: 60% now feel less optimistic about dealmaking compared to early 2024. Still, 48% remain positive about PE activity in 2025, though 29% harbor concerns.
Despite choppy debt markets, 87% of respondents in December predicted a rise in all-equity deals for 2025—extending a trend noted in Katten’s 2023 report. Yet, tariff-related uncertainty is now casting a shadow over some M&A momentum.
As interest rates steadied by late 2024, nearly 60% of dealmakers reported greater confidence in deal progression compared to the end of 2023. Meanwhile, 80% expect more exit opportunities in 2025, a jump from last year’s sluggish pace.
Over three-quarters (76%) see the economic climate as a dealmaking opportunity, buoyed by stable rates and hopes for extensions of the Tax Cuts and Jobs Act. However, as Kimberly Smith, Katten’s Corporate Department global chair, noted, “…Uncertainty surrounding the impact of tariffs on business forecasts is now casting a shadow over some M&A activity.”
Business services, technology, financial services, and energy top the list of promising middle-market sectors for 2025. About 80% of respondents view digital and tech transformation—spanning AI, blockchain, and cloud computing—as a key opportunity, with one executive citing 2024 successes tied to sustainability and AI innovation.
Technology transformation, an improving economy, and abundant capital are driving dealmaking. Global PE assets hit a record $10.8 trillion by late 2024, up 11.6% from 2023, per Ocorian. Most (over 80%) are bullish on add-ons and platform acquisitions, with 87% expecting more all-equity deals. Still, 37% foresee exit challenges.
More than half of respondents flagged economic uncertainty and regulatory pressures as 2024 dealmaking obstacles, expecting them to persist or worsen in 2025. “The findings from our report suggest dealmakers are shaping their strategies—and outlook—for a more sober post-boom environment,” said Christopher Atkinson, co-chair of Katten’s M&A/PE practice. Yet, “Overall, we found the middle-market PE sector positioning itself for growth.”
In short, while tariffs and policy ambiguity have soured short-term sentiment, stabilizing conditions and tech-driven opportunities keep PE dealmakers cautiously optimistic for 2025.