Navigating Uncertainty: Insights from ACG’s Recent State of Private Equity 2025 Event in Los Angeles

At the recent ACG event, The State of Private Equity 2025 in Los Angeles, investors such as Apollo, K-1 and Butterfly Equity shared their perspectives on how today’s market conditions are reshaping investment strategies. Amid mounting macroeconomic uncertainty, deal flow has slowed, and private equity firms are navigating a more cautious capital environment. With growing unpredictability influenced by recession risk, many investors are reassessing both where and how they deploy capital. 

Shifting Market Dynamics 

A “higher for longer” interest rate environment remains the consensus outlook. Even with potential rate cuts on the horizon, spreads are widening, and leverage is declining—putting added pressure on credit markets and valuation strategies. Tariffs continue to create instability, especially in sectors with global supply chains. PE firms are also keeping a close eye on pending regulatory shifts. Volatility is increasing, but that also signals opportunity. 

In turn, investment strategies are evolving. Capital remains abundant, but it’s chasing a smaller pool of high-quality, differentiated assets. Proprietary deal sourcing is becoming more attractive—one firm reported that 50% of their transactions are now completed outside traditional banking channels. These deals often require longer timelines (18–36 months) but deliver greater certainty and more favorable terms. 

Longer Holds, Deeper Plays 

With valuations resetting, longer hold periods are influencing PE firms to drive meaningful operational change. Across the board, there’s a renewed focus on value creation through automation and operational optimization. This ranges from rethinking AR/AP processes to leveraging automation in client services, specifically using AI to improve customer experiences, warehousing, and data optimization. 

Additionally, ESG and B Corp certifications are no longer “nice to have.” Increasingly, they are baseline expectations from both consumers and investors, signaling the importance of brand integrity. 

Sector Watch: Software and Food 

Within the software space, the story is bifurcated. Some verticals are presenting distressed assets, while others are primed for growth. Successful firms are doubling down on sector specialization to identify opportunities and moving quickly on them.  

In the food sector, inflation and consumer caution are shaping demand. Input costs are rising, and consumers are pulling back on premium items, such as protein powders. In suit, investors are adjusting their strategies—starting further upstream in the value chain, focusing on enablers and ingredients, rather than consumer-facing brands alone. 

At the same time, consumer skepticism toward processed foods is growing. Minimally processed foods, including products like raw milk, which has seen 23% YoY growth, are gaining traction as consumers seek out simpler, more transparent options. 

Talent as the Ultimate Differentiator 

In the current market, the ability to adapt has never been more essential. While firms that lean into operational depth and thoughtful deployment of capital will be better positioned to thrive, ultimately top talent at the executive level will separate the winners from the rest. 

Firms that prioritize securing agile, execution-focused leaders will be best positioned to navigate uncertainty, capitalize on emerging trends, and unlock growth amid longer holding periods. The right leadership is what turns strategy into results. In 2025 and beyond, talent, particularly in operations, is going to be more crucial than ever.