Much of the private equity (PE) space is in a holding pattern, biding time in a stalled market. Elevated interest rates are making it more difficult to secure financing, while potential tariff implications are dampening investor confidence. At the same time, increased regulatory scrutiny is creating an unpredictable business environment.
These factors, combined with a sluggish initial public offerings market and valuation mismatches, are forcing PE firms to hold onto portfolio companies longer than anticipated. Maintaining, and even creating value, depends on how well firms can find efficiencies and remain flexible.
Finding Hidden Value
The past few years have seen lower than average activity in the PE space, a trend that investors hoped to see turn around after the 2024 election. However, in April this year, mergers and acquisitions announcements fell to the lowest level since 2005.1
According to Michael Salvatore, private equity practice lead for The Hartford, the confidence PE firms had going into 2025 has been tempered by trade concerns, tariff wars and global conflict.
“Not to say it’s been completely stagnant,” says Salvatore. “There are pockets of deal activity and some optimism for the near future. In the meantime, I do think that a lot of PE firms are looking at their current investments, especially those with longer timelines, to drive efficiency out of the deals versus making new investments.”
During the quieter periods, firms can take stock of investment operations to find ways to generate better returns, create stability and increase value.
“With money being more expensive to borrow, PE leaders can focus on how to drive efficiency,” explains Salvatore. “It’s not about getting rid of head counts but more about risk mitigation, specialization and investing in new system platforms.”
Risk Mitigation Savings
Employers spend more than $45 million a year on work-related musculoskeletal injuries.2 With the right strategy, firms can reduce money spent on workers’ compensation claims and losses. Salvatore recommends taking advantage of an insurer’s risk mitigation resources that aim to prevent injuries first and foremost, such as:
- Wearable technology to help identify on-the-job safety risks.
- Treating employees who are hurt on the job compassionately.
- Offering specialized return-to-work programs to help get employees back on the job safely with less impact to productivity.
Supply Chain Strategy
PE firms may also choose to use this downtime to review operations and find cost-saving measures.
After the supply chain issues experienced four to five years ago, how a company will get their products and supplies should always be top of mind. Impacts from international tariff changes will likely impact cost and delivery times. Possible solutions for supply chain management include onshoring manufacturing, looking for tax-incentives in various geographies and negotiating fixed-price contracts for suppliers. This is especially important for portfolios with construction and manufacturing. According to The Hartford’s Global Insights Center, the United States imports nearly 35 million metric tons of steel annually. As additional tariffs are imposed and geopolitical issues fluctuate, the cost of this and other goods and supplies, is expected to rise.
Technology Investments
Now is a good time to audit capabilities and strategize investment in new technology like Artificial Intelligence (AI) to help with speed to market capabilities. As deal activity begins to pick up, speed becomes a critical factor in successfully turning around insurance proposals for deal opportunities.
Portfolio Adjustments
Firms naturally have some hesitation around deal activity, but that doesn’t mean there aren’t any good opportunities out there. It may just require looking into less conventional deals.
“Private equity firms like predictability and predictable revenue streams,” explains Salvatore. “They don't want to suddenly find out there's an expense component that wasn't contemplated in the initial deal, and there could be a potential impact to what they modeled out for projections.”
PE firms may want to consider shifting away from jumbo deals to industries more insulated from the current headwinds and increasing regulatory scrutiny. Lower-end, middle-market opportunities may be a better bet as they are often less regulated, younger and more agile in the marketplace.
The Importance of Readiness
Firms who stay prepared for when the market opens back up will be ready to implement exit strategies and begin new acquisitions. Having an insurance partner with private equity expertise can also help firms manage risk and find success.
“There's a lot of capital sitting on the sidelines that PE firms, at some point, need to use,” says Salvatore. “Their ability to adapt in the meantime while focusing on operational efficiency will create the stability needed today and the readiness for the future.”
Learn more about economic trends and risks impacting businesses today.
1 The Wall Street Journal, Global Dealmaking at 20-Year Low as Uncertainty Abounds, viewed July 2025.
2 Injury Prevention Services Fact Sheet. A Healthy Workforce Means a Healthy Business, viewed July 2025.
