Healthcare, Utilities, and Certainty: PE’s New Safe Bets

Good morning, ! It's Wednesday and we're covering private equity’s dealmaking recovery status, secondaries dry powder to deployment ratio, and the most important levers for value creation in private equity deals.

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DATA DIVE

Monthly Deep Dive: Repricing or Reset? PE’s Recovery Is Getting Selective

Private equity dealmaking has bounced back—but the bounce has a filter. Q1 2025 hit $93B in deal value, up from a cycle low of $61B, yet volume remains cautious at 49 deals. Sponsors are chasing thematic clarity over FOMO, tilting toward sectors with pricing power, margin resilience, and essential demand—hello, healthcare, utilities, and tech-lite platforms. Exit activity is also picking up, with $89B in Q1 2025, driven by dry powder urgency, mature asset pressure, and thawing buyer appetite.

But the real story is below the hood: sponsors expect rate stability with a dovish lean, yet they’re hedging like the Fed’s hiking. They see soft landings priced in, but recession risks as real, with nearly half already seeing contraction. Tariff risk is being baked into M&A models, not as a headline risk, but as a core valuation input—reshoring is a strategy, not a theme.

The upshot: this isn’t a “rising tide” market. It’s a disciplined, bifurcated bull run, where only high-conviction themes get funded—and everything else gets backlogged. (Read or Listen to the Full Report)

TREND OF THE WEEK

The Exit Bottleneck Behind Fundraising Fatigue

Private equity’s exit freeze is turning into a systemic block. With just 473 exits globally in Q1 2025 (a 2-year low), capital isn’t recycling fast enough. Strategic buyers are cautious, IPOs are rare (18 PE-backed listings), and continuation funds—while growing—haven’t bridged the gap. This logjam has real consequences: median fundraising time now tops 18.3 months, and even heavyweights like Blackstone are still stuck mid-raise. The kicker? A staggering 57.1% of dry powder is older than 3 years. LPs aren’t just fatigued—they’re liquidity-starved. GPs can forget pitching new funds until they solve the cash-out puzzle. (More)

IN PARTNERSHIP WITH PACASO

He’s already IPO’d once – this time’s different

Spencer Rascoff co-founded Zillow, scaling it into a $16B real estate giant. But everyday investors couldn’t invest until after the IPO, missing early gains.

"I wish we had done a round accessible to retail investors prior to Zillow's IPO," Spencer later said.

Now he’s doing just that. Spencer teamed up with fellow Zillow exec Austin Allison to launch Pacaso. Pacaso’s co-ownership marketplace is disrupting the $1.3T vacation home market. They’ve already surpassed $110M in gross profit and $1B in transactions.

They also recently reserved their Nasdaq ticker PCSO. But unlike Zillow, you can invest in Pacaso as a private company.

Until midnight PST tomorrow, Pacaso is accepting investors at $2.80/share.

Invest by midnight.

LIQUIDITY CORNER

Secondaries: Cash Rich, Deal Poor

The secondaries market is sitting on plenty of dry powder, but struggling to put it to work. The ratio of available capital to actual deployment fell to 1.88x in 2023, its lowest point since 2020, when it briefly bottomed at 1.59x during pandemic dislocation.

Compare that to the frothy years: 4.64x in 2018 and over 4.0x again in 2019 and 2022. The takeaway? Secondaries funds are flush with commitments but lack compelling opportunities—or conviction, to deploy. Market volatility, valuation uncertainty, and fewer LP sales have frozen parts of the deal pipeline.

Strategically, this matters. Secondaries have become the preferred liquidity outlet for LPs and a key lever for GPs managing hold periods. If deployment doesn’t rebound soon, GPs may struggle to execute continuation vehicles at scale, and LPs banking on interim liquidity may be forced to wait. The capital is there. The problem is finding places to put it. 

DEAL OF THE WEEK

OpenAI Plugs into Abu Dhabi’s Power Grid

OpenAI’s $20B Stargate UAE partnership with G42 isn’t just a regional infrastructure play—it’s the sovereign-wealth version of an all-you-can-eat GPU buffet. The 1GW AI compute cluster aims to nationalize ChatGPT in the UAE, turning Abu Dhabi into a live sandbox for public sector AI deployments. Add a $6.5B acqui-hire of Jony Ive’s hardware startup io, and OpenAI’s now playing on both sides of the stack: building the pipes and designing the faucet. The combined move hints at a future where AI isn’t just software—it’s sovereign infrastructure with a shiny user interface. (More)

PRIVATE CREDIT

Term Loan Nation: The Rise—and Risk—of One-Sided Private Credit

A full 67.9% of U.S. private credit loans are plain-vanilla term loans. Add another 14.7% for pari passu hybrid loans—which sit below senior secured debt in default waterfalls—and you get a picture of a market leaning hard into risk concentration. Revolvers? Just 9.5% of the mix.

According to the Boston Fed, this matters because private credit is no longer in the shadows—it’s a systemically relevant lender with $300B in bank loan commitments and growing. Fed research shows top PE/PC sponsors are stacking hundreds of loans each, while utilization rates climbed from 40% to nearly 60% over the past decade. Translation: leverage is increasing, visibility isn’t. In stressed conditions, that’s a recipe for liquidity scrambles.

The kicker? This lending boom is hiding in plain sight—classified across 30+ NAICS codes and buried in bank balance sheets. The regulators are watching. Dealmakers should be too. (More)

MICROSURVEY

Most important levers for value creation in private equity today

With elevated entry multiples and macro uncertainty, private equity firms are rethinking their value creation playbooks. Our recent survey reveals a near tie: 27% of respondents cite operational efficiency and cost reduction, while another 27% prioritize pricing and commercial strategy. Digital transformation (23%) and leadership upgrades (21%) also stand out, especially among consultants. These results highlight that value creation is no longer driven by a single lever—success lies in integrating operational, commercial, digital, and talent-focused strategies to drive long-term returns. (More)

MACROVIEW

Downgrade Dominoes

The U.S. just got a fiscal demotion. Moody`s downgraded America’s credit rating, citing a cocktail of ballooning deficits, weak governance, and a political class that treats debt ceilings like piñatas. Despite remaining a global safe haven, this symbolic downgrade isn’t just optics—it’s a mood setter. Inflation remains sticky, the Fed’s “high-for-longer” stance isn’t blinking, and GDP growth is more plateau than peak. Meanwhile, emerging markets could face a “sudden stop” if global capital flees for safer shores. The last time EMs got spooked, $35B walked out the door in 84 days. No wonder PE dealmakers are eyeing macro like hawks. (More)

THIS WEEK IN HISTORY

Assassination of Rajiv Gandhi

The assassination of Rajiv Gandhi, former Prime Minister of India, on May 21, 1991, sent shockwaves through the nation’s political landscape and had significant repercussions for the country’s business environment and economic stability. At a time when India was already confronting a severe balance of payments crisis, high inflation, and the urgent need for structural economic reforms, Gandhi’s murder heightened political uncertainty and temporarily undermined investor confidence. The immediate aftermath saw heightened volatility in financial markets, as concerns about political instability and the continuity of economic policy prompted foreign and domestic investors to adopt a cautious stance. However, this tragic event also galvanized India’s political elite and business community around the necessity of reform and stability. The subsequent government, led by P.V. Narasimha Rao and his finance minister, Dr. Manmohan Singh, seized the mandate for change, launching a series of bold liberalization measures that opened the Indian economy to global markets, deregulated key industries, and encouraged foreign investment. Over time, these reforms not only restored investor confidence but also laid the foundation for India’s emergence as one of the world’s fastest-growing economies. Thus, while the assassination of Rajiv Gandhi was a profound political tragedy, it ultimately served as a catalyst for transformative economic policies that reshaped India’s business landscape and its role in the global economy. (More)

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TWEET OF THE WEEK

"Success usually comes to those who are too busy to be looking for it¨

Henry David Thoreau