Private Equity 2025—What Does It Mean For The Small to Mid-Sized Business Owner?

Deal flow has been marginally subdued in 2025 but demand for acquisitions remains strong.  Elevated interest rates, global tensions, and erratic US economic and trade policy are affecting your individual business that require your complete attention.   You already know it is not an easy time for any company.

Now let’s be candid about how much money funds have at their disposal.  Dry powder remains ample and funds remain eager, if not desperate, to deploy their investors’ capital.  They will do deals even if the lending terms are higher than they hope to receive.  Business owners should remain picky about any deal terms they might consider.

Technology (AI!), energy, transportation, and infrastructure remain active areas with a notable rise in carve-outs, minority investments, structured equity, and consortium deals being parts of a transaction.

Technology, Energy, and War: The Holy or Unholy Trinity

Technology continues to lead U.S. deal flow with activity rising 36% year-over-year and value growing 40% in the first half of 2025.  To no surprise, this increase is driven by AI, cybersecurity, and enterprise cloud platforms. Energy and infrastructure are also hot areas in response to AI and data-center infrastructure deployment.   Anyone reading the newspapers will not be surprised that defense and aerospace deals also saw an exponential increase in deal value.

One friend of mine recently became the CEO of a freight business that is driven by AI.  The company is wringing out inefficiencies and creating other efficiencies that are very impressive.  I expect to see this company and similar companies dominate their fields.  FedEx and UPS should be concerned—the AI threat remains real.

In total, it is a great selling market for business owners in these sectors.

Private Credit: Good, Bad, and Ugly

As traditional bank lending pulled back, private credit lenders played an increasing role in funding transactions.  One could argue private credit is the dominant source of committed debt in a more-cautious rate environment.

That said, private credit has been bracing for a rude and crude reality for quite a while.  Class A office buildings remain underwater all over the U.S.  Borrowers who looked like good bets in 2021 are creating problems well before their loans mature in 2025.  I foresee private lenders amending and extending loans into PIK loans because borrowers cannot sustain debt levels at their locked-in or expiring rates, nor can they refinance with anyone else.

Business owners need to understand private lending funds are selling themselves as “mature” or “proven” because they have been prevalent for the past couple of decades.  Since one could have said the same thing about a number of products in 2008, it is imperative that borrowers and lenders up their due diligence efforts.

I must also note that I have seen an uptick in family offices and funds looking to take advantage of what they believe will be a tremendous increase in bankruptcy filings and companies simply going out of business.  My suspicion is that they will be disappointed that the deals will never be as good as they were in 2009-10.

Legal Landscape: GOP Regulates Wherever It Can, However It Can

The GOP’s reputation as preferring less regulation continues to take tremendous hits despite a significant relaxation of environmental, securities, and other standards and enforcement efforts in Washington DC and GOP-led states.  Between ICE enforcement and the commonly dubbed “federal war on science”, the federal government is extraordinarily active.

The reason for the GOP’s reputational change is simple: MAGA loves to regulate anyone it deems an enemy regardless of whether it ultimately benefits them and their followers.  MAGA officials at state and local levels are warring with each other through statutory and regulatory actions.  This has also caused Democrats to play both offense and defense at the state and local levels.

On a transactional and deal-by-deal level, I anticipate there will be a renewed emphasis on (a) force majeure clauses that are directed at protection from government action; (b) representation and warranty insurance being purchased by more buyers; and (c) funds insisting on more creative post-closing adjustments that are intended lead to future litigation as a side-door to negotiate decreases in future earn-out payments.

The biggest winner will be attorneys and lobbyists.  Ironic but true.

Fundraising and Fund Finance

Funds appear to be crying wolf yet again.  Trillions of dollars continue to be raised for buyout, private credit, venture capital, and all sorts of funds.  One area where I see a noticeable increase is “secondary direct” funds where business owners sell minority portions of their companies, retain control over their companies, and receive expertise in certain areas from the investing fund.  If this sounds familiar, this is what sports teams have been doing over the past 5-10 years with enormous success.

Do not fall for the hype over “new and innovative” funds.  There is not much difference between what has been done over the past 500 years and what is being proposed today.  The differences are in particular terms.  Most notably, early redemptions are becoming nearly impossible, which has begged the question from many people—why should I pay high fees and not have access to my money at a time of great uncertainty.

 

David Seidman is the principal and founder of Seidman Law Group, LLC.  He serves as outside general counsel for companies, which requires him to consider a diverse range of corporate, dispute resolution and avoidance, contract drafting and negotiation, and other issues. 

He can be reached at david@seidmanlawgroup.com or 312-399-7390.

This document is not legal advice.  Please consult an experienced attorney to assist with your legal issues.