Private equity firms are seeing a rebound in deal-making activity and a willingness to engage in larger, more complex transactions.
Broadcast Retirement Network’s Jeffrey Snyder discusses the interest in private equity with Foley & Lardner LLP’s Louis Lehot.
Jeffrey H Snyder, Broadcast Retirement Network
This morning, private equity, the appetite for risk, seems to be returning. Joining me now is Louis Lajo, a partner with the law firm of Foley & Lardner. Louis, great to see you.
Thanks for joining us on the program this morning.
Louis Lehot, Foley & Lardner, LLP
Good morning, Jeffrey. Glad to be here. Thanks for having me.
Jeffrey H Snyder, Broadcast Retirement Network
Yeah, I can see the beautiful scape outside your window. It looks lovely. It looks like you’re having a lovely day where you are.
Let’s talk about private equity in 2025. Obviously, we just passed Q3, but it appears that there is a sense of optimism returning in private markets, but specifically, excuse me, private equity.
Louis Lehot, Foley & Lardner, LLP
Yeah, you know, Jeffrey, it’s been a tale of two worlds for the last few years where sellers wanted an 8 to 10x multiple on an exit and buyers didn’t want to pay more than a 6x multiple. And the gap that you would normally bridge with financing or earn out just got really wide with the greatest increase in interest rates that we’ve seen, at least in my lifetime, that came together with the greatest squeeze on the Fed, on monetary policy that we’d ever seen. And those things happen all together at once.
And so you really had a monumental shift in the cost of money and the cost of holding money. And so private equity really has been in a bind. So we all thought that with the beginning of 2025, a new administration, deregulation, less regulation, hopefully some declines in interest rates, some easing of pressure on M&A that we would have private equity firms back in the market.
And unfortunately, we got hit with uncertainty, uncertainty, uncertainty. Then in the beginning of Q3, we had finally some resolution on what tax policy was going to be. We had the one big, beautiful Budget Act or Bill Act, which bridged us for about three months until the next crisis.
But we saw a really active Q3 in private equity. And I think that was really driven by secondaries, where private equity was able to package assets together, either singly or together, and sell them into other funds. We had GPs that were out able to raise funds for their GP vehicles.
We saw some DPI or return of capital to investors. DPI is this ever important metric, Jeffrey, I know you know this, of distributed proceeds invested ratio. And we finally had some DPI in Q3 as GPs were able to return capital to LPs.
And then at the beginning of Q4, we had the government shutdown. And as I speak to you this morning, Jeffrey, we have great hopes that that finally has been resolved, at least through the end of January. And hopefully we’re now going to have a strong end of the year.
I’ve never seen a backlog of such great technology companies ready to come out and have a fabulous exit as I do now, whether that’s going an exit via the public markets or some sort of an M&A sale.
Jeffrey H Snyder, Broadcast Retirement Network
Yeah. And let me ask you about, so I mean, all good information. And as you said, it seems like things are trending in an upward trajectory.
That’s really great news for investors. Let’s talk about fundraising. Are you seeing, and obviously you’re not a private equity firm, but presumably you represent many GPs.
And are they seeing an uptick in fundraising, meaning interest from pension funds and endowments and foundations and other high net worth family offices? Are they seeing an increase in interest in what they’re offering?
Louis Lehot, Foley & Lardner, LLP
That’s a great question. And I do think that the rise in the public equity markets that we’ve seen in 2025 year to date has what I’ll call right size, some upside down portfolios. So what we saw in 22, 23 and 24 were that, you know, limited partners, large investors and private equity funds were overexposed to the asset class because they had the value of their public markets portfolio had not kept up with the value of their private equity portfolio.
And so they were over overweighted on PE. And now with the real run up in the equity markets, they’re right sized. And I think they’re back in the market looking for funds.
So what I’m seeing is that a first time fund is able to raise capital relatively easily. A second or third time fund that has a low DPI metric, Jeffrey, is having a real struggle still. And then, you know, the historical large, you know, what I’ll call super funds or multi stage, multi sector funds are able to raise capital again right now.
And so I think it’s going to be a great finish to 25 and a good start to 26, assuming we don’t have another government shutdown.
Jeffrey H Snyder, Broadcast Retirement Network
Yeah. Fingers crossed on that. Hopefully Congress and everyone can get their act together, so to speak.
That’s just my personal opinion. So we can avoid this in the future because it has so many deleterious effects in so many aspects of the economy, as you’ve already said. If I could, I know one of your offices is located in the heart of Silicon Valley in San Francisco.
Are there specific sectors where you’re seeing private equity maybe have a greater interest? As an example, artificial intelligence is one that you can’t read it. You can’t pick up a newspaper or at least one virtually and see that AI is not in some articles.
So is that is that a particular sector of interest? Are there other? I’ve been reading about accounting firms, maybe some big restaurant chains.
Are there other areas of interest in terms of investments?
Louis Lehot, Foley & Lardner, LLP
Sure. Great question. I think defense tech is an area where private equity is really looking deep.
I think there’s a consensus among Democrats and Republicans that our defense systems are going to need to be upgraded. They’re going to need substantial investment in the years to come. At the same time as we have some pretty important hot wars going on in multiple geographies around the world.
So I believe that defense tech is going to be a big area of growth in 2026. Space is a place where we’re going to see a lot of growth as building satellites, which can enable telecommunications, broadcasting are going to continue to be important. That’s how they interact with defense systems.
So I think defense tech is really a big area where private equity can go. And it’s one of those areas where it’s too rich for venture capital to go. And it also is an area where you can have, you sign a government contract, you can have pretty good visibility five, 10 years out on what revenues are going to look like.
So it’s very financeful, unlike some speculative new technology that we might hook up here in Silicon Valley, such as AI, where people are not yet comfortable. People in private equity can’t really bank on the next five to 10 years of revenues.
Jeffrey H Snyder, Broadcast Retirement Network
Let me also ask you about, you mentioned the one big, beautiful budget act or bill. They keep on changing the names, but I think the president refers to it as the big, beautiful bill. But let’s also talk about some regulation or regulatory changes.
I think the Department of Labor, there was an executive order to the Department of Labor to establish some protocols and regulations around private markets and retirement plans. I know that may not be a particular area of expertise for you, but you’re dealing with these firms. They have to be bullish on that opportunity.
It’s a $29 trillion opportunity. Are you seeing a lot of interest in terms of creating products, services, et cetera, for that marketplace?
Louis Lehot, Foley & Lardner, LLP
It’s early days, Jeffrey, in that regard. So I think many new funds are in planning stages to take advantage of that deregulation, but much rulemaking needs to happen yet to allow those projects to come to market and crystallize. But I do think there’s a lot of optimism about the private equity industry and their ability to tap into new sources of capital from retail investors.
Jeffrey H Snyder, Broadcast Retirement Network
Yeah, and it’s not just private equity. It would be all forms of private markets and cryptocurrency. So I think the marketplace, just speaking for myself, not for anyone else, it’s always good to look at new products that become available if you’re managing a retirement program or you’re investing in one.
Having access, at least, is a good place to start. Presumably, the shutdown will be over, at least temporarily, assuming they have fingers crossed, toes crossed, legs crossed, hands crossed, eyes crossed, that that doesn’t happen. But presumably, they’ll be able to get back to work at the Department of Labor to maybe help put some of those rules in place.
Louis, we’re going to have to leave you there. I could talk to you for hours. Great analysis, great work.
And look, we look forward to having you back on the program again very soon.
Louis Lehot, Foley & Lardner, LLP
Thank you very much, Jeffrey. You have a great day ahead.
Jeffrey H Snyder, Broadcast Retirement Network
That’s all for this morning’s episode, but we’re back again tomorrow for another great edition. Until then, I’m Jeff Snider. Stay safe, keep on saving, and don’t forget, roll with the changes.
