Private equity: turning tariff risk into portfolio opportunity

The effects of U.S. tariffs on the Private Equity sector

According to The Business Times, tariff‑driven volatility has cut year‑to‑date U.S. buyout deal volume by nearly 18% compared to the same period last year. Earning forecasts have become harder to model, forcing sponsors to widen valuation ranges or introduce contingent pricing clauses, and investment committees that once approved term sheets in a matter of weeks are now demanding tariff sensitivity analyses and alternative supply‑chain scenarios, lengthening closing timelines and killing borderline transactions.

Similarly, Preqin’s latest data on the global PE industry shows that capital raised in 2024 slipped to $635 billion from $690 billion in 2023, with North America accounting for the bulk of the decline. Participants cited trade policy risk as a top three concern, behind only interest rate uncertainty and recession fears.

As a result, the H1 deal landscape has seen a continued (and even increased) focus on add-on deals, as well as continuation funds and other vehicles to extend lifecycles. For PE firms extending tenure and delaying exit, how can they secure value despite uncertainty in the market?

The global impact of the U.S. tariff increases has been a massive increase of uncertainty, and they create new challenges and urgent operational arbitration decision both for the portfolio companies doing business and for the PE firms trying to model and manage their performance. With the right expertise, however, there is still plenty of opportunity to be had.

Matthieu Boye Partner

Value creation will help PEs navigate turbulent trade policy changes

However, Preqin’s data also reveals another side to that same coin: funds with explicit reshoring, infrastructure, or “tariff‑hedge” themes closed, on average, 28% above target. Investors appear willing to write larger checks for PEs that can turn trade friction into a competitive advantage. Many experienced PEs, some of whom have past experience navigating significant trade policy changes, are finding ways to bolster portfolio confidence with strategies like “friend-shoring,” market and customer base diversification, implementing “tariff true-up” mechanisms into credit agreements and exploring dual-entity structures.

Whilst such manoeuvres can preserve EBITDA margins, they can also further lengthen holding periods and complicate exit math. And with exit environments still poor compared to a few years ago, with IPO windows in the U.S. and Europe still largely shut, PEs are finding ways to partner with their portfolio companies to generate more value and build resilience.

All of this aligns with the reported increased focus across the PE sector on value creation. The latest PE data from Forvis Mazars shows that both majority and minority shareholders are showing higher rates of return and more control over performance when active within their portfolio companies, including partnering with management teams and helping organisations navigate and overcome operational challenges. In the shifting sands of the current trade policy landscape, this value creation strategy will be especially successful for PE firms with trade policy specialists and other supporting experts in place. Despite the prevalence of continuation funds and other lifecycle extension strategies, firms will need to bring platform companies to market eventually, and value creation can help boost those companies into the high performing category in order to secure the highest possible returns.

“People have to get liquidity somehow. The continuation funds solve that problem for a period of time, but you can’t do that with your entire portfolio. You have to keep trading platform assets in order to get liquidity back to your LPs, and value creation can help boost performance and generate returns on those platforms in an otherwise tricky deal market.”

Scott Linch, Partner, Forvis Mazars US

Dealmakers anticipate a stronger H2

After months of uncertainty, those at the helm of some of the biggest, most profitable deals are expecting a much stronger back half of 2025. Whilst political and industrial uncertainty may have held off some of those deals thus far, they will go ahead eventually, likely stacking H2 in a way that at least partially makes up for a slow start to the year. Forvis Mazars Partner Scott Linch elaborated on this outlook recently at DealMAX; click here to watch the full conversation.

Looking forward, most market observers expect tariffs to remain a fact of life, even as the market stabilises after the current wave of changes. In the long term, the winners are likely to be the PE firms that can integrate trade policy intelligence into every phase of the investment cycle, from target screening and due diligence to post‑deal value creation.

Stay informed on global trade, tariffs and economic developments with the Forvis Mazars global trade insights tracker (GTI tracker). Designed for senior business leaders, it delivers strategic insight into trade policy and market risks.