Private Equity Trends: AI Surges While M&A Takes a Backseat

Survey Insights on Private Equity Priorities

In a recent groundbreaking survey, FTI Consulting, Inc. (NYSE: FCN) highlighted notable shifts in the private equity landscape as 2025 approaches. Their findings reveal that merger and acquisition (M&A) strategies have surprisingly dropped in priority, with only 9% of global leaders in private equity considering it their foremost focus. This marked change emphasizes how firms are increasingly relying on more conventional strategies to catalyze value creation.

Current Focus Areas in Private Equity

The survey encompassed over 500 private equity decision makers worldwide, shedding light on their strategic preferences. Not surprisingly, the emphasis remains on optimizing cost structures and enhancing operational efficiencies. These approaches have become staples in the industry as firms realize their efficacy in delivering immediate returns.

Interestingly, the report identifies artificial intelligence (AI) as the emerging star of value creation for 2025. AI stands out as the most significant factor driving exit readiness, reinforcing its vital role in shaping the future of private equity. However, its implementation remains challenging, indicating a critical gap between ambition and execution.

The Role of Cost Management

According to Jiva J. Jagtap, the Global Leader of Private Equity at FTI Consulting, the ongoing dialogue within firms heavily leans towards cost management in today's unpredictable market. “While cost control is essential for value protection, it is equally important to channel these savings into opportunities for growth,” Jagtap explained. High-performing firms are adept at combining cost-saving measures with strategic reinvestments that spur sustainable growth over time. This dual focus is vital as firms navigate a challenging economic environment.

Key Findings from the Survey

Several critical insights emerged from the survey regarding the operational trends within private equity:

• Technology and IT emerged as leading levers for value creation, with 84% of firms leveraging these tools, and 77% reporting their effectiveness. Despite this, technology poses significant execution challenges at the portfolio level, highlighting the need for robust operational frameworks.
• M&A, while still recognized as an integral component of the value creation toolkit, is perceived less favorably, with 67% of respondents expressing that it takes over a year to realize anticipated values from such transactions.
• AI is seen as an essential transformational force, yet it remains underutilized, ranking ninth among the ten levers reviewed in the study. A staggering 42% of leaders identified AI as pivotal in reshaping traditional operational models.
• Surprisingly, commercial strategies aimed at driving revenue growth are the least employed, with only 23% to 28% of firms actively utilizing pricing optimization, sales marketing, and AI for value enhancement.

Challenges Ahead for Private Equity Firms

As numerous firms adopt equitable AI strategies, a notable divide persists between strategic goals and actual execution capabilities. Lars Faeste, EMEA Chairman at FTI Consulting, emphasizes that success in future value creation demands an integrated approach—one that goes beyond mere financial metrics to a comprehensive embedding of innovative technologies and methods.

For firms seeking to thrive, the transition from strategic planning to impactful execution is paramount. With M&A increasingly sidelined, a disciplined focus on growth strategies can provide an opportunity for those willing to seize the moment effectively. Private equity leaders are encouraged to foster enhanced operational governance, shared objectives, and transparent communication to bolster deal effectiveness.

Looking Forward in Private Equity

The evolving dynamics in private equity will shape how firms engage in both operational management and strategic planning. Continued investment in AI and other technologies promises to transform the industry as leaders strive to innovate and drive sustainable growth. The survey results suggest that while traditional cost levers hold significant weight today, firms that prioritize technological integration will likely outpace their peers in the long run.

Frequently Asked Questions

What is the primary focus for private equity firms in 2025?

Private equity firms are primarily focusing on artificial intelligence (AI) and traditional cost optimization strategies, while M&A has fallen in priority.

How many decision-makers participated in the FTI Consulting survey?

The survey included over 500 decision-makers from various private equity firms worldwide.

What percentage of firms is currently using technology as a value creation lever?

Approximately 84% of surveyed firms are utilizing technology regularly for value creation.

What challenges do firms face with AI implementation?

Many firms find integrating AI into operations challenging, ranking it among the least frequently used value creation levers despite its potential.

What is the overall sentiment regarding M&A among private equity leaders?

M&A is viewed as a lower priority, with many leaders indicating that it takes significant time to achieve expected outcomes from such activities.

About The Author

Greetings, I'm 32-year-old author and financial specialist Evelyn Baker. My introduction into the financial industry started with an economics degree and continued with a wealth of experience in wealth management and financial consulting. My great passion over the years has been assisting people and companies in making wise, well-informed decisions to reach their financial objectives.

My goal with writing is to simplify difficult financial ideas into understandable, doable guidance. My goal in writing many books and articles is to make personal finance understandable to everyone, irrespective of their experience or background. I want to give readers the information they need to take charge of their financial futures, from investing and retirement planning to budgeting and saving.

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