INTRODUCTION Contributed by: Markus Paul, Freshfields
The 2025 Landscape for Private Equity Transactions
dies or in relation to outbound investments. The ever- changing sanctions landscape impacts investments in times of geopolitical volatility. And recent events have shown that we have to expect both disruptive and gradual changes to global trade and tariff regimes to impact businesses and transactions. Private Equity Transactions by Negotiated Agreement Most private equity transactions are concluded by negotiated sale and purchase agreement. Private equity investors may take the role of buyer or seller (upon exit) – or, in a secondary buyout, both. M&A market terms tend to vary from one jurisdiction to another. There are markets that typically are more seller-friendly (most European jurisdictions, with the UK known to be particularly seller-friendly). Other mar - kets are more buyer-friendly (with the USA as a good example). Sometimes, market terms are also a func - tion of market maturity; eg, less developed markets tend to have greater variability in terms. Notwithstanding different M&A market terms around the world, private equity investors typically take very similar positions in negotiated transactions, regard - less of jurisdiction and market practice. It is useful to look at these typical private equity positions both from a buy-side and a sell-side perspective. Private Equity Buyers Consideration mechanism Private equity buyers are usually comfortable with either a locked-box or a completion accounts con - sideration mechanism. In a locked-box sale and purchase agreement, the purchase price is determined based on a historic balance sheet of the target business. The purchase price is then fixed in the sale and purchase agreement (sometimes subject to interest or a per diem amount). The buyer is protected by ordinary course and no leakage provisions (ie, the locked box). For a private equity buyer, this has the advantage of high certainty at signing regarding the amount of the purchase price that will become due at completion. There is little risk of unexpected over- or underfunding. Market practice in European jurisdictions, such as France, Germany,
Just when everyone thought that M&A markets finally were recovering from a prolonged period of disruption, market volatility struck again. In early 2025, global capital and financing markets suffered when the new US administration introduced measures impacting global trade and tariffs, and geopolitical events con - tinued to challenge economies in many parts of the world. M&A deal flow concurrently slowed down (yet) again, adversely impacting both the exits of financial investors from portfolio businesses and their ability to put to work the funds that their investors had com - mitted. Outlook In the short term, we can expect financial investors to continue efforts to generate liquidity for their investors by fund-level transactions, such as continuation fund, other fund-to-fund and secondary deals. At the same time, market participants are hoping for less disrup - tion and a further closing of the pricing gap between seller and buyer expectations. This would allow more traditional sponsor transactions to proceed in the sec - ond half of the year 2025 and beyond. The mid- and longer-term outlooks for private equity remain very positive. Global mega-trends will drive attractive investment opportunities; these include digitalisation, population growth and ageing socie - ties, energy transition, and efforts to address deficits in infrastructure and defence spending. Globally, the amount of capital available for private equity and other private capital investments stands at unprecedented levels. An increasing number of private equity investors continue to branch out and expand the types of asset classes and transactions they target. Whether it is infrastructure, debt, venture capital, growth or minority investments, “private equi - ty” has become “private capital” and has expanded its reach accordingly. Private Equity in an Increasingly Regulated World The continuous evolution of regulation is an ongoing legal trend impacting private equity across jurisdic - tions. There is rising scrutiny, whether in antitrust or foreign investment regulation, regarding foreign subsi -
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