Q1��25 Pulse of Private Equity �� United States insights

Mix of headwinds and tailwinds affecting US market

Private equity investment and deal activity remained relatively steady in the US during Q1��25, with a notable increase from Q4��24. Investment rose from $210 billion across 2113 deals in Q4��24 to $234 billion across 1670 deals this quarter �� reflecting a strong start to the year.

However, momentum in the latter half of the quarter was tempered by rising concerns over newly implemented tariffs on imported goods and the potential for retaliatory counter-tariffs. Despite these emerging headwinds, several supportive factors �� such as ongoing deregulation efforts and lower energy costs �� are expected to provide some balance and could help sustain PE investor confidence in the months ahead.

Large PE firms raising bigger funds as smaller funds struggle

In Q1��25, US private equity funds raised $66.8 billion across 80 deals �� a slight dip compared to the same period last year. While overall fundraising was marginally lower, the quarter reinforced a key trend: fund sizes in the US continue to grow, driven primarily by the largest and most established PE firms with a track record of positive returns.

This expansion in fund size has contributed to an uptick in megadeals, as firms seek to effectively deploy record levels of dry powder. However, this cycle of consolidation and scale has made the fundraising environment increasingly difficult for smaller and mid-market players —especially first-time fund managers. Many have faced significant headwinds in securing commitments, as LPs concentrate capital with firms that offer broader platforms, proven track records, and perceived lower risk.

Value creation becoming a critical focus for PE firms

When interest rates were very low, many PE firms in the US focused primarily on add-ons and roll-ups as a key means to grow company scale and reach in order to lift valuations. As capital grew more expensive, this focus has shifted quite dramatically; currently, many PE firms are prioritizing real value creation over scale growth, including applying superior management techniques and technologies to operations in order to improve efficiencies, lower costs, enhance value outputs, and drive corporate revenue. While add-ons have remained a tool in the PE firm tool-kit, many add-ons in the current market have been smaller in size and focused on opportunities to use the add-on to drive more value within a business rather than simply to provide scale.

Interest in energy transition and transport continues to surge

The Americas energy sector continued to attract strong interest from private equity investors in Q1��25, driven by soaring energy demand and a wave of large-scale transactions. PE investment in the sector reached $35.7 billion versus $94.4 billion in all of 2024. While deal count remained roughly in line with last year’s pace, the sharp rise in deal value reflects the presence of several outsized deals.

Investor focus within the sector has shifted notably in recent quarters. While enthusiasm for renewable energy assets such as wind and solar has cooled, interest in traditional energy sources �� particularly natural gas and LNG �� has gained significant momentum. Additionally, PE firms ramped up investment in energy transportation and storage infrastructure, positioning themselves to capitalize on the growing need for reliable energy distribution and backup capacity.

Industrials see renewed interest from PE investors

Despite being among the sectors most exposed to tariff-related risks, US industrials saw renewed private equity interest in Q1��25. This counterintuitive trend may be linked to the sector’s evolution in response to pandemic-era disruptions. The challenges of COVID-19 pushed many industrial businesses to redesign their supply chains �� making them more flexible, diversified, and resilient.

As a result, select companies in the sector are now better equipped to navigate geopolitical uncertainty and trade-related volatility. Their operational adaptability and proactive risk management have allowed them to gain a competitive edge, making them attractive targets for PE firms seeking value in sectors that can weather shifting macroeconomic conditions.

Trends to watch for in Q2��25

Private equity investment in the US is expected to remain subdued through Q2��25, as investors continue to grapple with market uncertainties. Although the early days of the quarter brought increased clarity around US tariff policy, questions remain regarding the responses from other jurisdictions and the pace of potential negotiations. If significant progress is made on the trade front during Q2, the second half of 2025 could see a rebound in deal activity. Until then, the uncertain policy environment is likely to weigh on investor confidence and constrain deal flow.

In this environment, PE firms are expected to concentrate activity in tariff-resilient sectors such as technology, business services, financial services, and healthcare �� industries perceived as better positioned to weather global trade volatility. Even within sectors that are particularly viewed as tariff-sensitive, companies that learned and built upon the lessons of supply chain resilience in 2020 and 2021 may see perceived value above their competitors.

At the same time, recessionary concerns in the US may further widen the valuation gap between buyers and sellers, posing challenges for private sales. Still, intensifying pressure from LPs to deliver liquidity could force exits in Q2��25, even at valuations below PE firms�� expectations.