How Do Tariffs Impact Private Equity? Uncertainty Brings Opportunity

Private equity (PE) entered 2025 with more optimistic expectations for dealmaking activity. However, those expectations have been tempered by a fresh round of tariffs from President Donald Trump, described by HarbourVest as “more aggressive than anticipated.”

Following signs of an improving exit environment and strong deal momentum from late 2024, and robust Q1 2025 deal volume in certain sectors, most general partners (GPs) now find themselves in “wait and see” mode due to evolving trade policies.

With many tariff measures since-paused, the market remains uncertain about the extent and impact of tariffs, potential retaliatory measures by U.S. trade partners, and what to do next.

As a trusted finance and accounting (F&A) partner to hundreds of PE firms and their portfolio companies, we’ll share our insights on tariff timelines, impacts on dealmaking and valuations, emerging opportunities, and how middle-market firms can maintain their competitive edge.

Source: PBS

Impact Across Private Equity

1. Dealmaking

Despite tariff anxieties, first-quarter PE deals reached $221 billion globally, a 67% increase over Q1 2024, according to S&P Global Market Intelligence. However, this growth was uneven. 

Areas of Strength

Technology, business services, and healthcare have continued with deals “at a good speed.”

Meanwhile, Paul Buckley, CEO and Managing Partner of FIRSTavenue, anticipates “a migration of investor capital towards infrastructure and real estate asset classes as investors seek a combination of return and certainty.”

Areas of Weakness

In a recent PitchBook interview, Michael Akkawi, a partner at Mintz, observed that “deals in some industries will be hard to close these days.”

He highlighted that industrials and manufacturing (particularly those with cross-border supply chains) are suffering delays, as caution has led many GPs to intensify due diligence efforts or reprice deals based on potential tariff costs.

Akkawi also noted an uptick of sellers suspending sale processes and/or buyers withdrawing from auctions for businesses who source from international suppliers.

2. Exits

Exits, constrained by high interest rates and a buyer-seller valuation gap, have slowed following a slight improvement from 2023’s record holding periods.

• Extended Holding Periods: Preqin Pro data shows the average holding period edged down to 6.1 years in late 2024, but many expect that figure to rise again as sellers delay transactions.
  
• IPO Slowdowns: According to S&P Global, 2024 saw 212 PE-backed IPOs globally (the most since 2021), but IPO momentum may stall this year. 

On the recent turmoil, Eneasz Kadziela, head of private equity and deputy CIO for the NYC comptroller told Private Equity International that he believes “in the short term, volatility will put a chill on dealmaking and exit activity.”

However, optimism remains for activity to exceed 2024 levels by the back-half of 2025. 

Advisors like Patrick Quay of EY-Parthenon believe that “the underlying conditions for private equity to both deploy new capital and to exit existing positions are still there.”

3. Carve-Outs

According to PitchBook, dealmakers expect carveouts to remain a significant driver of PE activity in 2025, with companies using the opportunity to improve balance sheets and refocus on core operations.

Brian Richards, Co-Chair of Paul Hastings’ private equity practice, noted that PE firms are focused on carveouts “because those are the deals they can find right now.”

4. Valuations

In Q1 2025, total US PE deal value increased 11.8% year-over-year, but trade policies threaten to dampen earnings and valuation processes in tariff-sensitive areas like industrials and manufacturing.

Fund managers must recalibrate valuations in real-time with the evolving policy landscape. 

Per PitchBook reporting, a senior PE professional noted how difficult it is to “reprice a deal right now based on what’s happening with tariffs, because it seems to be changing every single day.” 

Opportunities: Positioning for Strategic Advantage

History shows that market dislocations can create openings for opportunistic PE investors. While some sponsors have hit the brakes, others see opportunity in distressed deals and secondary transactions.

KKR CFO Robert Lewin noted at a February S&P Global conference that “volatility…could certainly be beneficial,” for PE firms with the ability to buy undervalued businesses and hold them until the environment improves.

Distressed Acquisitions

• Companies whose margins are hardest hit by tariffs could become takeover targets at discounted multiples.
  
• Middle-market PE firms with operational expertise can renegotiate supply contracts, shift sourcing strategies, and restore profitability over time.

Secondary Market Gains

According to HarbourVest, “secondary buyers could again see opportunities to acquire high-quality portfolios at steep discounts.” 

• Secondary Markets: May thrive if LPs need liquidity or if the “denominator effect” forces them to reduce private market exposure.
  
• GP-Led Restructurings: Sponsors can establish continuation vehicles to avoid selling in a depressed market, holding assets until market conditions stabilize.

How Should PE Firms Position Themselves?

1. Enhance Diligence Beyond First-Tier Suppliers

John Fiorentino, Managing Director of Alvarez & Marsal, told S&P Global that while most fund managers understand their direct tariff exposure, fewer have drilled into the potential impact of secondary suppliers.

“What you don’t know is the inflationary exposure…when your supplier now passes on a 25% increase.”

GPs should map end-to-end supply chains, employing scenario planning for different tariff escalation paths.

2. Optimize Portfolio Operations

Partick Quay of EY-Parthenon also noted that many PE firms are using extended holding periods to improve operations. 

“You’ve seen a much larger movement towards true underlying value creation by private equity managers, and not just financial engineering,”

• Seek cost reduction in areas like finance, accounting, and procurement. Firms may consider back-office automation or consolidating vendors to offset higher input costs.
  
• Encourage revenue diversification for portfolio companies reliant on volatile trade links.
  

3. Stay Adaptive

• Engage trade experts, revisit corporate structures, and consider adding tariff triggers in portfolio KPI monitoring.
  
• Leverage consulting partners (financial, legal, and tax specialists) to keep pace with fluid policy changes.

How Consero Can Help

Consero offers a suite of tailored finance solutions to equip PE firms with the complete financial visibility and back-office support to navigate tariff complexity and drive operational excellence across their portfolios.

Audit & Due Diligence Support

Consero provides a structured approach to both audit and due diligence, ensuring PE firms can confidently evaluate targets and manage portfolio companies. 

With full visibility into key financial indicators and operational processes, Consero can help identify potential red flags, offer guidance for remediation, and help sponsors streamline negotiations.

Back-Office Automation

Many portfolio companies struggle with time-consuming back-office tasks, pulling leadership from mission-critical activities. 

Consero’s cloud-based finance and accounting services automate core functions like accounts payable, financial statements, and payroll.

With Consero reducing manual workloads and supporting the back-office, PE firms can work with their management teams to focus on strategic priorities that drive growth.

Real-Time Data

Consero’s SIMPL platform centralizes reporting and dashboards, ensuring on-demand visibility into each portfolio company’s financial health. 

This level of immediate insight is critical for swift and well-informed decision-making when markets or operations become unpredictable.

Profitability Enhancements

Consero’s expertise in controller services and broader finance operations helps PE firms improve profitability across their portfolio, while providing a lower and more predictable cost structure to benchmark F&A spending and performance.

With our scalable solutions, firms have the flexibility to add or reduce resources as needed, whether streamlining costs, executing new acquisitions, or preparing companies for exit.

FP&A

Effective Financial Planning & Analysis (FP&A) is vital in uncertain environments. Consero’s FP&A solutions provide PE sponsors with AI-powered insights to model various business scenarios, examine cash flow, and forecast performance. 

By providing consistent, real-time data, Consero ensures sponsors can act swiftly on market shifts and strengthen their portfolio’s overall valuation.

CFO Support

When portfolio companies need strategic financial guidance, Consero’s CFO consulting services deliver the expertise required to navigate complex business challenges. 

• Strategic Oversight: Offering guidance on financial modeling, capital structure, and growth strategies.
• Process Improvement: Introducing best practices for internal controls, reporting, and oversight.
• Best Practices: Coaching finance teams on how to maintain compliance, enhance operational efficiency, and support strategic decision-making.

Additional CFO support is invaluable when addressing the uncertainties of a dynamic market. 

Consero’s seasoned financial professionals ensure that core financial functions and strategic planning are robust, transparent, and aligned with value-creation goals.

Exit Readiness

Bringing a portfolio company to market requires meticulous planning, comprehensive financial reporting, and seamless operational workflows. 

Consero specializes in preparing portcos for potential exits:

• Audit-Ready Documentation: Ensuring all financial statements and records are accurate, organized, and compliant.
• Robust Forecasting: Providing potential buyers with a clear vision of the company’s future earnings potential through reliable, data-driven projections.
• Streamlined Operations: Demonstrating sustainable processes and tech-enabled back-office systems, which can drive a smoother transition post-acquisition.

These measures help PE sponsors command strong valuations in exit scenarios. By addressing the financial and operational details beforehand, Consero reduces deal friction and accelerates the path to close.

With Uncertainty Comes Opportunity

The 2025 tariff landscape has injected fresh uncertainty into private equity, muting the early-year optimism and bracing fund managers for slowing exit activity.

Yet, history shows that volatility presents new opportunities for PE sponsors skilled at operational improvements, contract renegotiation, and careful supply chain management.

In this uncertain environment, Consero offers a strategic ally for middle-market sponsors, providing back-office automation, diligence expertise, and strategies to protect and enhance portfolio value. 

Consero’s solutions provide the structure and insights necessary for PE sponsors to remain agile and seize new opportunities. With centralized financial data, automated processes, and expert guidance, PE firms can more confidently navigate uncertainty, drive portfolio value, and optimize exit outcomes.

Request a meeting with our team to find the perfect solution for your needs.