Private Equity in the U.S. in 2025: Navigating Uncertainty, Opportunity, and the New Normal

By Kyle D. Henderson, President, Sandgaard Capital

Private equity has always thrived on its ability to adapt to changing conditions, and that resilience is being tested again in 2025. Over the past several years, firms have faced a series of headwinds—rising interest rates, stubborn inflation, regulatory uncertainty, and a more difficult exit environment. Yet even in the midst of these challenges, opportunity is far from gone. At Sandgaard Capital, we see an industry in transition—one that rewards discipline, operational focus, and long-term perspective.

The Current State: Key Trends & Challenges

Capital deployment remains strong, but the playbook has changed. Firms still sit on significant amounts of dry powder, yet they are deploying with greater caution. Rather than chasing aggressive growth stories, investors are prioritizing resilient business models, recurring revenue streams, and conservative leverage. The era of easy money is behind us, and selectivity has become the new norm.

Exits, meanwhile, are proving harder to come by. IPOs remain limited, and strategic buyers are cautious. Many portfolio companies are being held longer than originally planned, delaying distributions to limited partners. To bridge the gap, continuation funds, sponsor-to-sponsor deals, and recapitalizations are becoming more common.

Valuations are also adjusting. Higher borrowing costs and tighter credit conditions are pressuring multiples, especially in leveraged buyouts. The firms that will win in this environment are those that can create true operational value—improving processes, reducing costs, and investing in technology—rather than relying solely on financial engineering.

Layered on top of these economic dynamics is a shifting regulatory landscape. The SEC, tax authorities, and policymakers continue to debate new rules that could reshape the industry. At the same time, investors are demanding more transparency, stronger governance, and credible ESG strategies. These pressures are changing not just how deals are structured, but how value is measured.

Finally, sector specialization and diversification are proving more important than ever. Firms with deep expertise in healthcare, technology, infrastructure, and renewables are seeing steady deal flow. Others are leaning into private credit, secondaries, and distressed opportunities—areas where flexibility and creativity can open new paths to returns.

What It Means for Sandgaard Capital

For us, the message is clear: discipline and adaptability are the keys to thriving in this environment. We’re focused on businesses with strong fundamentals, capable leadership, and cash flow that can withstand volatility. Our position as a family office allows us to be patient with exit timing, embracing creative solutions when traditional IPO or M&A paths are less attractive.

Operational value creation is at the center of our approach. We invest in the company behind the company—building better systems, talent, and ESG readiness. This work not only protects against market headwinds but positions our portfolio companies for durable, long-term success.

We’re also keeping a close eye on regulatory and policy risk. Staying ahead of changes in securities law, taxation, and fund oversight ensures we’re not caught off guard. And when it comes to capital structure, we prefer a conservative stance on leverage, but we’re willing to be opportunistic in areas like private credit or distressed investments where dislocation can create attractive entry points.

Perhaps most importantly, we believe alignment with values and impact matters. ESG and social responsibility are no longer “nice-to-haves”—they’re central to reputation, access to capital, and long-term value creation. As LPs and stakeholders demand more accountability, we’re prepared to deliver.

Looking Forward: What to Watch

As we look ahead to 2026, several factors will determine the trajectory of private equity:

• Interest Rates. If rates come down, deal activity will accelerate and valuations will improve. If they remain high, expect continued pressure on returns.

• Trade and Tariff Policy. Global supply chains remain vulnerable to uncertainty. Clearer policy could reduce risk premiums and improve investor confidence.

• Regulatory Changes. Adjustments to SEC oversight, taxation, or retirement account access could significantly reshape capital flows.

• Exit Markets. Stronger IPO and M&A activity would boost distributions and investor sentiment. Weak exits will mean longer holds and delayed value realization.

• Competition. With corporates, SPACs, and other players actively bidding for assets, success will depend on speed, clarity, and operational excellence.

Conclusion: A Time for Judicious Action

The private equity market in 2025 is not for the faint of heart. But times of transition often present the best opportunities for those who are disciplined, patient, and prepared to create real value. At Sandgaard Capital, we’re fortunate to operate without the short-term pressures faced by many firms. That freedom allows us to focus on building durable companies and generating sustainable returns.

For fellow investors, my advice is simple: don’t try to outguess every move in macro policy or interest rates. Focus on what you can control—rigorous due diligence, operational excellence, aligned incentives, and investment theses built on fundamentals, not speculation. That’s how to succeed in private equity’s new normal.