Happy New Year, Hubsters! MK Flynn here in New York with the US edition of the Wire.
Sources tell us that 2025 may be a great year for private equity M&A in most sectors, with positive signs including plenty of dry powder in PE coffers, more realistic expectations from sellers and lowering interest rates. Many also predict tax and regulatory policies will be more favorable to dealmaking under the new administration. On the downside, tariffs may affect some industries negatively, such as the consumer and retail sectors, and there’s a lot of uncertainty about the healthcare sector.
In PE Hub’s Outlook series of Q&As, today we hear from the co-CEOs of The Riverside Company, a prolific middle-market firm. “We are seeing a greater willingness of investors to consider fresh investments and new managers, and we expect to see that increase over the next several years,” Béla Szigethy and Stewart Kohl told me.
Looking ahead, a highlight of this year will be PEI Group’s NEXUS 2025 summit, coming up March 10-12. I’ll share some details, below.
Also, I’d like to remind everyone that the deadline to send nominations for PE Hub’s Deal of the Year Awards is this Friday, January 10. More below.
Risk-on mentality
The Riverside Company is one of the most prolific private equity firms in the lower mid-market. Béla Szigethy founded the firm from his apartment on New York’s Riverside Drive in 1988. Today, the firm is headquartered in New York and Cleveland and has $13 billion in assets under management. Szigethy serves as co-CEO alongside Stewart Kohl, who joined the firm in 1993 and has the same title. In 2024, Riverside completed 16 exits and announced one more. The firm expects to deliver about $1.7 billion in total distributions back to investors for the year.
I asked Szigethy and Kohl to share their outlook on dealmaking in 2025, as part of PE Hub’s ongoing series of Q&As with PE thought leaders. Here’s an excerpt:
What changes did you see in 2024?
With the M&A market healing, distributions rising and PE valuations adjusted, the numerator effect is finally abating and investors are climbing out of their foxholes, peering around and testing the market. They have adequate liquidity, are less fearful of the “Godot Recession” and perhaps sense greater certainty.
We are seeing a greater willingness of investors to consider fresh investments and new managers, and we expect to see that increase over the next several years.
Savvy allocators to PE know that just like with public equities, where one must be careful not to miss the big up days that drive returns, they have to have exposure to what could prove to be an exceptional vintage in private investments.
We would note that all of the above is focused on the traditional institutional investors.
What other trends are you seeing as the new year begins?
Over this same period, there has been a parallel evolution and significant growth in the private wealth channel (PWC) consisting of high-net-worth individuals, family offices and their wealth managers and advisers wanting to invest in private equity.
Riverside has been a participant in this trend with the PWC accounting for on average one-quarter of our recent vintages, and we would anticipate this increasing to over one-third and perhaps someday close to half of the funds we raise.
CIOs are slowly shifting into a risk-on mentality for private equity (note they have been more risk-on for private credit markets for some time), but investors remain highly discerning, selective and willing to do more work, dig deeper in diligence, be more patient and demanding, and GPs must respond with enhanced fundraising capacity and improved stewardship.
And, of course, at the end of the day, it is the returns including DPI that will differentiate the haves from the have-nots.
We expect the overall market to grow again with the best offerors and investors seeing the most rapid and significant increases in activity, and we anticipate Riverside being a beneficiary.
For more Outlook 2025 Q&As from PE Hub, see:
- EQT’s Eric Liu: FTC leadership change likely to improve dealmaking, but heightened attention on PE will remain
- GP-led continuation vehicles still in demand, even as M&A picks up
- Hamilton Lane co-CEO Erik Hirsch: Retail investor impact on private markets will be ‘seismic’
- Bain Capital’s Ivano Sessa: ‘Quietly confident’ on European dealmaking in 2025
NEXUS 2025 preview
Connecting powerful private equity firm leaders with influential capital allocators, PEI Group’s NEXUS 2025 will take place March 10-12 at the Ritz Carlton, Orlando Grande Lakes in Orlando, Florida.
Featured speakers include:
- Orlando Bravo, co-founder and managing partner of Thoma Bravo
- Suzanne Donohoe, chief commercial officer of EQT
- Hollie Haynes, founder and managing partner of Luminate Capital Partners
- Chip Kaye, chairman of Warburg Pincus
- Xavier Robert, partner and chief investment officer of Bridgepoint
- Pete Stavros, co-head of global private equity at KKR
- Jon Winkelried, CEO of TPG
The conference will also feature PEI Group’s reporters and editors from Private Equity International, PE Hub, Buyouts, Private Debt Investor, Venture Capital Journal and more.
I’m looking forward to exploring dealmaking across several sectors, including tech. I’ll be talking on stage with Orlando Bravo. You can read my pre-event interview with Bravo here.
Earlier today, we published Craig McGlashan’s pre-event interview with Xavier Robert, partner and chief investment officer of Bridgepoint. (Bridgepoint owns PEI Group, the publisher of PE Hub.)
Deal of the Year Awards: Deadline approaches
There are just a few days left to send in your nominations for PE Hub’s 35th annual Deal of the Year Awards, which honor exceptional buyouts that were fully or mostly realized in 2024.
The deadline for submission is Friday, January 10, 2025. Winners will be selected in six categories, plus an overall winner, and the results will be published on pehub.com in March.
PE Hub’s Deal of the Year Awards 2025 categories are:
- Large-Cap North America – recognizing the sale of a company with an enterprise value at the time of the exit of $1 billion or more
- Large-Cap Europe – recognizing the sale of a company with an enterprise value at the time of the exit of $1 billion or more
- Mid-Cap North America – recognizing the sale of a company with an enterprise value at the time of the exit of $200 million to $1 billion
- Mid-Cap Europe – recognizing the sale of a company with an enterprise value at the time of the exit of $200 million to $1 billion
- Small-Cap North America – recognizing the sale of a company with an enterprise value at the time of the exit of $100 million to $200 million
- Small-Cap Europe – recognizing the sale of a company with an enterprise value at the time of the exit of $100 million to $200 million
- Deal of the Year – recognizing one of the category winners as the best LBO exit of 2024. This will be given to the single deal that stands out for its innovation and execution. There is no separate nomination for this category.
Send in your nominations today!
As always, I’d love to hear from you at mk.flynn@pei.group.
Tomorrow, Craig McGlashan will bring you the Europe edition of the Wire, and Obey Martin Manayiti will bring you the US edition.
Happy dealmaking,
MK
