Private Equity Predictions: 2025 Roadblocks, Accelerators, and What’s Next

Sean Mooney:

[00:00:00] Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and real time trends. I'm Sean Mooney, BluWave's founder and CEO. In this special episode, we're talking about the critical insights we learned in 2024, our predictions in 2025, and how to play to win.
This episode is also a really good accompaniment to our 2024 PE Insights, Year In Review, and 2025 Predictions Report. Enjoy!
Welcome to another episode of Karma School of Business. This one is a special episode where we revisit the key insights that we observed in 2024 in the private equity industry, and we'll tie those to how

[00:01:00] they're informing what's going to happen in the future. by going through some of our top predictions for 2025.
So this is a really great episode. We do them every year. It reminds me of this quote by Socrates, or at least generally regarded or paraphrased to Socrates, is, Our lives are but specks of dust falling through the fingers of time, which is otherwise known as, Like sands of the hourglass, so are the days of our lives.
Which was also a very popular soap opera and a quote from a famous movie called Bill and Ted's excellent adventure. So I'm clearly coming outta the gates here, like a true renaissance person. Let's jump in. As I reflect on 2024 as listeners to our podcast, so often now I view the world kind of metaphorically, but in this case, 2024 felt to me like I'm in this vehicle, this car, I'm.
entering the highway on this on ramp. I'm getting excited. We're picking up speed. We're going to this great destination, only to run

[00:02:00] into stop and go traffic. And it was like stop and go and stop and go. And it was terribly frustrating. Occasionally you're jamming on the brakes, then you're hitting your gas.
And that's what I felt like last year. Everyone thought that 2024 was going to be this big breakout year. And unfortunately it wasn't for a variety of reasons, but it was still pretty good. And now, where I view ourselves through this metaphor is that we've gone around the bend, maybe gone through a couple fender benders, but now you can see the traffic opening up, and you can see the vehicles ahead of you picking up speed, and you know that this is the time where you have to hit the gas as well, and you're going to start getting closer and closer to this great place that we're all trying to get to.
And so, to me, that's what really happened. And why do we think that? And so what we looked at in 2024 was at the end of the day, the economy was pretty good, but we had kind of this turmoil and this angst associated with an election year, not only in the US, but across the globe. And

[00:03:00] we, as a result, had this kind of like washing machine of good news, bad news that was going on.
At the end of the day, though, when we sum everything up in terms of what we saw, we're seeing a recovery in acceleration in the private equity deal market that is informed and supported by these positive economic signals. We have the election year behind us. There's clarity about what's going to happen.
And increasingly, we're seeing the business builders of private equity shift towards growth and stick with the teams that they have. That leads us to believe that the next economic cycle is underway. And so let's talk about each of those a little further. And so one, if we look at the economy, we've had really strong enough economy for quite some time.
We've seen 10 consecutive quarters of GDP growth. That's pretty good, right? We've also seen highly steady unemployment. If you look at where we are in kind of the low fours, that's historically at the low end, the positive edge of what's generally regarded to be full employment of

[00:04:00] four to 5%. So if we're sticking in the fours, that means that there's plenty of jobs out there for people.
And there's plenty of people hiring. The other thing that we saw was inflation meaningfully moderated last year. It came down a lot. It's still quite sticky. It's got that last lap to go, which is often the longest, but it's at a point where you can actually get things productive. And as a quick aside, people are always talking about why is there a 2 percent target?
The reason for the 2 percent target for the Fed On inflation is much less spectacular than I think many people would hope and dream. It really came out of a relatively lesser known central banker from New Zealand in the late 80s. And New Zealand had gone through some inflationary periods. And they set a new target, and they said our target is 2%.
And then lo and behold, the rest of the world eventually said 2 percent is our target as well. And actually, the Fed didn't even embrace that target until many

[00:05:00] years later. So. 3%, that's on the high end of what you want, but it's not awful. And then at the end of the day, we're also seeing stimulus coming from the Fed, where you've got federal interest rate cuts going from the mid fives.
Now we're into the fours. The 10 year treasury is sticking around a little higher because of maybe some expectations of inflation being there longer and less stimulus, but at the end of the day, rates have come down quite a bit and the debt markets are also much improved. So not only have the baseline rates.
Which are generally in the private equity industry referred to as SOFR, which is the rate that banks lend to each other. But what has also happened is not only has the SOFR gone down, but so have the spreads. There's been a ton of capital that entered the private debt markets in last year. And so, the competition in the debt markets has created the overall cost of debt to come down quite a bit.
And so, one, the economy's pretty good. The other thing is that all of the angst,

[00:06:00] the emotion, the turmoil associated with the election last year is behind us. We're a politically agnostic enterprise here at BluWave, but I think everyone can agree they're just happy to have this thing over, and at least now people know.
what the vision is for the future and who the CEO, who the president of our economy, who the global economy is right now. And now we can make plans accordingly, knowing in general what the game plan is going to be for the next four years. Now, it just so happens that with this new administration is also coming the promise of less regulation, more openness to M& A, more openness to capital markets.
That's a good thing, particularly as it relates to the investment community and business builders, because it's likely to turn out that there's a more forgiving posture and supportive posture for the deal community, the investment community, the business builders therein.

[00:07:00] And so, politics aside, it is kind of what it is.
And so that's another good thing that leads us to believe, like, okay, not so bad. And then the other big thing that we saw kind of happen last year is that in kind of a really surprising way is we saw human capital activity pretty meaningfully moderate last year within the business builders of private equity.
And you wonder kind of why that is. And maybe if you look at it from a BluWave data perspective in 2023, 43 percent of all of our products and projects that we supported were related to human capital. Last year was 39%. So still by far the number one focus here in private equity, but a lot lower than what it was.
And at first glance, you might say, Whoa, the private equity industry is hiring less. Does that mean we're in a line for a declining economy? Are they firing and not

[00:08:00] hiring? No, the reality is what we're seeing is that they're sticking with their teams. And so, as we went through COVID, the subsequent decline in 2022 and 23, we saw a lot of the business builders in the world of private equity bring in quote unquote wartime generals.
People who were skilled with operating through difficult, fluid times that could batten down the hatches, optimize cash flow, make sure that these businesses will survive. And what we saw then is this pivot. And last year, 2023, and going even into 2022, where they could start seeing kind of the market have clearer skies ahead.
And we saw this shift from kind of wartime generals back to peacetime ministers. And so actually, if you pull back this onion and look at the different layers, what we've seen is that the P firms have done the top grading, they've brought in the skills that were not. Resident in their companies when they

[00:09:00] initially made their investments and they're sticking with their teams, which is really a pretty interesting insight, meaning that there's not churn.
There's not firing. It's just saying we've got the right people for this next cycle and everything that we see a BluWave leads us to believe that we are already entering. And on our way into the next 5 to 7 year growth cycle. I don't believe it's going to be another 10 to 15 year bender like we went through from 2010 to 2022.
We're going to enter back into more normal. economic cycles, five, seven, eight years, and going through this normal progression of growth and recession and growth and recession, hopefully in a more muted way than previously experienced. It's a natural evolutionary cycle of the economy that enables it to Go through kind of fevers, shed the germs that were causing disruption in these economies and come out

[00:10:00] stronger each time.
And so no one wants to live through it, but at the end of the day, a fever is pretty good every once in a while. It helps you kind of reset your immune system. And that's, I think, what we went through. And we're going into the next growth cycle as we enter into the next economy.
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Sean Mooney: And so we'll talk about some of the big trends.
But the last thing that we saw that is really interesting relates to some of the AI and analytics that we're doing with our own data. And so in this most recent 2024 Insights and 2025 Predictions Report, we unveiled a new measure that we're going to be publishing on a recurring basis. And we're

[00:11:00] calling it BluWave's Private Equity Priority Index, so the PEP Index.
And what we're doing is Doing sentiment analysis across the thousands of projects that we support the top business builders in the world by equipping the resources they need to lift revenue, optimize costs, get the right people in place, get the right technology in place, etc. And so we look at that intex in a really kind of mathematic way, we're able to see that the private equity firms have quite meaningfully been shifting from more of a profitability perspective, where they're like, we've got to increase cash flows, got to batten down the hatches.
And we saw that perspective grow from 20 to 21 and 21 to 22. And then what we saw was a gradual increase in 23 Equipping their businesses more towards growth. And then in 24, we saw an acceleration towards growth and we, in the fourth quarter of 2024, had one of the highest growth-minded

[00:12:00] periods of equipping resources in the history of this index that we retroactively measured all the way back to 2020.
So it's a really interesting measure. We're seeing PE firm increasingly hitting the accelerator as they're coming around the bend. Leaving the stop and go traffic and picking up speed as he head to the next growth cycle. And so what did that mean in terms of the actual projects that they were going? We saw meaningful activity in sales and marketing going towards, like I said, go to market strategy, Salesforce effectiveness, pricing strategy.
We saw tons and tons of operational improvement work. That operational improvement work right now is not only about improving costs of your operational structures. But it's also about improving capacity. Particularly as we, as we'll talk in a moment about what will likely be a pretty meaningful reshoring of industrial capacity in the U.
S. And then we also saw people taking action around procurement. Inflation is still not ideal. And there's the specter

[00:13:00] of tariffs coming up that we'll talk about further in a few minutes, so. A lot of operational activity that was still going on, we still saw tons of hiring. Really where we're seeing more activity is within the P firms equipping the business unit leads or the functional leads, and further down in the organization, they seem to be sticking more with their C suite executives.
And the other big, meaningful trend that we saw last year that I think Shows the deliberateness, the purposefulness, the planning of the P industry is we saw for the first time activation of AI enablements across private equity portfolio companies. If you were to go back to 23, a lot of the projects that came in would start with neural networks.
And we want to put these things across our industry. And where they'd end up is like, well, first we need you to get your data organized. You should visualize it. You should analyze it. And then we can start bringing in some of these tools. Also, in 2023, a lot of AI was buzzwords. It was

[00:14:00] like the internet in 1996.
The Internet's a strategy. No, it's not a strategy, it's a tactic. And so private equity firms, I think, are getting that very quickly. This is a tactic. There's certain areas that you can use this to increase efficiency, fly in organizational structures, make your companies more agile, and get more out of less from each of your organizations.
And it's not like your people are going away. They're just becoming tremendously more efficient where the people can do the people things because they're letting the robots do the stuff that people don't like more. So, and so, For the first time, really in the second half of last year, 2024, we saw precursor activity shifting to actually enabling these AI sections and these AI technologies in certain portions of the organization, and that is only picking up as we speak today, where we're seeing this starting to really pick up in terms of getting things done in AI in ways that was really more talk in prior periods.
And what I

[00:15:00] really appreciate looking back on this is that, These were really thoughtful. It wasn't that just people were building neural networks and spending a bajillion dollars on AI where everything is a nail and the business builders were hammers just hammering everything. It's been pretty thoughtful.
We think it's going to accelerate. And as we'll talk about the predictions, it's going to have some pretty, I think, meaningful impacts on the future of business going forward. So that was 2024. It was a good year. I think it wasn't what people thought it would be. It was more. Stop and go traffic, but every signal that we're seeing leading into 2025 and beyond is that there's a pickup of pace.
Now all of this, I'm going to set the stage as we talk about predictions, is going to be conditioned on the caveats, right? The biggest single issue that I think is on everyone's mind is geopolitics. And will the world continue to progress in the face of

[00:16:00] geopolitical tension in multiple areas across the globe today?
And as a result of that, And some of the tensions that come through this, do you see inflation come back with the tariffs that are coming? Do you have tit for tat retaliations? Do you get kind of a grinding down of the economy? And that's something that I think everyone has to remain agile. So as we're talking about speeding up, don't take your hand off the wheel and know where your brake is.
But I think at this point, everyone is still putting their foot on the accelerator further and further. And it's really easy to get paralyzed. by the scary, risky things in the world. I take a little bit of comfort, though, as I think about every year, there's always been scary things, some more so than others, but Going back to a childhood that I experienced in the early 80s where everyone thought nuclear war was around the corner.
And so, the world has been a scary place, it will be a scary place, we can be

[00:17:00] paralyzed by it, or we can run past the risk towards opportunity, while still being mindful of it, being thoughtful about how we're going to react in advance of something happening. So long as we keep the agility, I think the business builders of P.
E. That's the big kind of review for last year. Pretty good. Could have been better. Everyone hoped it was. But I think it's really set the stage, kind of, going through the final stages of that fever that started in 2022. And now we're getting our pep back. We're starting to feel our energy back. Let's progress into what we think the key predictions are for 2025, what it's setting the stage for in 2025.
And if you look back, one of the great things that we get at BluWave here is we get to see how many hundreds of the world's best business builders and private equity take action in real time, why they do it, what they do, what the impact is, what are the expected outcome is, what the actual outcome was.
And

[00:18:00] it provides us this really amazing insight into what will happen. And I think if you were to go back to some of our prior predictions in years past, you'll see that we're pretty good at it. And so this is what's coming up in 2025 as we ingest the sum total of the pattern recognition of the projects that we're supporting in private equity and couple that with other kind of macroeconomic figures and insights.
So let's get into 2025 predictions. Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives that say, Hey, I'm not private equity. Can I still use BluWave to get connected with resources?
And the short answer is yes, even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders. Every day we get calls from everyday top proactive business leaders

[00:19:00] at public companies, independent companies, family companies. So absolutely you can use this as well.
If you want to use the exact same resources that are trusted and being deployed and perfectly calibrated for your business needs, give us a call. Visit our website at BluWave. net. Thanks. Back to the episode.
The first prediction we're making for 2025 is that the M& A market is going to continue to rebound. And we think that the market already has started. If you look at some of the early data from 2024 is that there was definitely a pickup in the M& A markets. Most of that pickup was around add on activity.
But we're seeing increases in the activity associated with platforms as well. And we'll talk a little bit about why that's going to happen in a second. But the reality is the M& A market wasn't that bad last year. It wasn't great, but it was getting a little

[00:20:00] bit better. And so the reason why we think that The M& A markets are going to continue to improve this coming year is that GDP is still pretty decent.
There is moderated, albeit sticky, inflation. We'll talk about that further. Unemployment's in a healthy range. Debt is available for deal making. The private equity portfolios are at some of the longest held agings they've ever had. And so the PE firms have to sell. The LPs are using the acronym DPI on a daily basis with them.
That's a distribution to paid capital ratio, meaning. What is the relationship between the money you've called from us versus the money you've returned to us? And so p firms got to return the capital at the same time They still have at near or all time highest dry powder amounts and so a trillion dollar plus of dry powder in the market that can still be put back to work and then you think about if p firms Want to raise new funds, which they're in the business of doing every three to six years, invest

[00:21:00] capital prudently, and then raise new capital towards new funds.
They need to raise new funds. If they're going to raise new funds, they got to sell portfolio companies. And so there's that tension that's causing those gears to be unstuck. And then last but certainly not least, there's a whole M& A ecosystem of investment bankers that Need to get paid. They're going to start finding ways to making deals happen as well.
So if you think about this, I think about this as like physics and gravity. There's just so many compelling forces at work that it has to happen. And stagnation is almost unavoidable because of the sheer inertia and momentum behind the fact that the deal market needs to get going again. And so as we think about what are the opportunities for business builders, If you're a P firm, you got to be ready to deploy capital effectively.
You got to be able to move fast. Action is critical and having a bias towards action. As we look at this vintage of deals that occurred in 24 and 25 in most cycles, these are the best deals that are made. Now the risks I

[00:22:00] think that business builders need to be aware of as well is that there's going to be a shortage of M& A service providers.
Many of these service provider firms, particularly in the due diligence side, have curtailed their capacity because it's been pretty slow deal years. And so with a growing surge of deals, they're not going to have the throughput available to do as many deals as could occur in 2025. So P firms, investors, those doing an M and a need to be mindful of that and be careful about unavailable service provider capacity and our behavioral economics will give you a team, but it's the B or C team is the youngest person on the team that we're going to dare to be great.
And so don't settle for that. Blade and plug, if you can come to BluWave, we have all those resources you need and can keep you equipped with haze. And then if you think about how do you play to win in this reduced capacity environment, a growing kind of surge of deals, I'd say those who are prepared are going to win.
Time kills deals if you're not able to

[00:23:00] move fast. Every deal is based upon valuation, terms, and timing. And so. Let's make sure you're prepared to move fast. That'll make you differentiate, particularly if you want an advantage over valuation, bring in top sell side experts. If you're selling your companies so that you can really portray the business in its best possible light and defend against kind of retrading every deal, I recommend bringing an interim CFO to support and a sell side, your existing CFO.
Every CFO can't fathom the unending amount of data requests that come in modern private equity, and no office of the CFO is prepared to handle that amount of demand for their insights. So, it'll be the cheapest thing you can do, it's gonna help you move fast, and it's gonna help you avoid the old adage of time killing deals.
Now, when buying But as they bring in specialized due diligence providers, the world of generalists, it's just challenging, right? Because generalist

[00:24:00] insights get you generalist outcomes, which means you're going to be in the world of beta in a return profile. You got to be in the top quartile part of the P world to really differentiate.
And so the specialists are going to tell you something that's not in the book. And all your diligence efforts should really be not only just about trusting and verifying what a seller is saying, but how do you equip alpha? How do you create insights to show I'm going to grow this company faster? I'm going to create more EBITDA.
I'm going to create more enterprise value. That's prediction number one. Prediction number two is we believe. for good reason, that there is a forthcoming manufacturing renaissance in the United States of America. The reason for this is all the things that we heard during the election cycle, and so there will be a very purposeful on shoring or re shoring of manufacturing capacity.
So these policies are intended really to support lower and middle class job creation and wage growth. They're also quite

[00:25:00] intentional for geopolitical reasons. I think any student of history knows how essential owning the means of production is during times of conflict. And so I think the United States very strategically saying we need to have strategic control over manufacturing capacities and capabilities, as well as bringing back certain critical elements of our supply chain and even raw materials, such that if something bad happens, we can make the stuff ourselves.
And I think we've seen history rhyme on that concept time and time again through the history of it. If you think about what the opportunity is, Morgan Stanley is valuing the upcoming on shoring and re industrialization opportunity at 10 trillion, and really attributes this to quote unquote 20 years of stagnation previously.
And so I think most prognosticators, economists, policy setters see this stuff coming for a variety of good reasons. And so,

[00:26:00] opportunities, if you are a company or you have portfolio companies with U. S. based manufacturing, you should right now start strategically thinking about optimizing the sales from your manufacturing footprints in U.
S. capacity. There are likely to be tariffs that are going to make Goods and services from lower cost offshore locations become more expensive. If you're in the U. S. and selling to the U. S. markets, or even outside the U. S. markets, there's going to be advantage. So start thinking about right now, what is your pricing and your go to market strategy.
If you haven't already, get going pronto. This is a, will be a growing opportunity for your companies that have domestic operations. On the flip side, start thinking about mapping out what type of demand you're expecting. And then how do you start increasing your capacity in key areas where you think demand will be?
With those opportunities come risks, like everything. And so I'd be careful about tariff retaliations that could impact your domestic company's global market access and

[00:27:00] cause reciprocal rising costs for your imported supply chain components, especially from China. Your company's products in the U. S.
could get more expensive externally. And so start thinking about the game theory around what's going to happen in a tit for tat tariff environment. and a reshoring environment. So how do you play this to win? First, think about your revenue side. You can bring in pricing experts that are private equity grade.
You can bring in go to market strategists that can help you think through how do you get every dollar out of this trend. I would really also recommend using lean Six Sigma manufacturing experts that are going to help you increase your capacity and your throughput while minimizing capex. So if you can get more out of your existing plants without having to spend dollar for dollar capex, that's a huge advantage.
Start talking to your procurement groups and your supply chain advisors saying, okay, if we're in some of these areas that are gonna be more targeted than others, how do we move our supply chains if you haven't already? Hopefully you're already taking action on that. Don't be afraid to use some of these Washington DC based

[00:28:00] lobbying firms that are going to help you navigate these complexities.
They can offer tremendous insights that few know what's coming and they can kind of see the future. And once again, shameless plug, we've got this great ecosystem used by the best business builders of the world every day. If you don't have go tos or you're questioning the ones that you have, we can give you a multiple private equity grade options that are available to you.
Whether or not you're in private equity, but you should be thinking about using these kind of a players because huge opportunities here Get it right the first time don't learn on your dollar Okay, the next one is we believe inherently the future of work, the future of business is going to revolve around flatter organizations.
The AI revolution that's occurring in these agentic tools is going to have rapid transformational impact on how businesses do business. And so if you think about this, they're going to be improving productivity and reducing your needs

[00:29:00] for Lower skilled, repetitive tasks. As a result, you're just going to need fewer people in certain parts of your organization.
And, or, the people that you have are going to be able to spend more time doing the thinking stuff. The more nuanced, hard to do stuff. The things that people like doing, and you're going to get an automation of the things that the robots are better at. And what does that mean? You should expect a wave of productivity that comes along with this.
And the way I think about this, every single major evolution in kind of industrialization and the internet, et cetera, every time they said, well, the robots are going to do everything or people are going to have nothing to do because their jobs are going to be gone. Well, jobs are going to change and that's going to be really tough and we're going to have to retrain for that.
But the reality is every time in my life on this earth, they've had one of these. It's the personal computer, then the internet, then the iPhone. Each time the pundits would say, uh, People are going to be out of business. Well,

[00:30:00] each time, what happened was we were able to just get a lot more done in the same 25 hours a day.
And so, don't approach it as saying people are going to go away. It's just that we're going to be more productive. As a result of that, though, you're not going to need what really happened, I think, in the last 10 years, where, particularly in the tech space, where you had this management class. Their primary skills were managing people as part of a larger ecosystem.
And that was valued then, but right now a lot of that's going to become Things that can be managed more automatically. And so the days of having a person who manages a person who manages a person with some poor soul at the bottom of that heap with hands on the keyboard, that's gone away, and it already has.
And so what's going to happen is that virtually every person in your organization is going to have access to an agentic assistant who is going to be able to do things with and for your people and then make it happen. Now, they're not going to replace the complex

[00:31:00] thinking that's going on, but they're going to help people think things through faster.
They're going to help activate what that person wants to get done. They're going to be able to do the first draft. And so the way that I think about where we are now, every person's going to have like a first year out of college direct report or an intern, and you're going to say, please do this for me.
You're going to review it and then say, well, do this this way, and then you'll do it again. And then, but at the end of result, you're going to get something done and. half to a third of the time that would have taken you, and you don't need to hire those people with those lower skilled wages. Now, that's going to have profound impacts on organizations, and it's going to require a cultural shift as employees transition from really valuing generalist people management skills and thinking that is going to be a tangible representation of their value add in the economy, to understanding that people are going to have to be increasingly player coaches.
And measure it on your impact and your force

[00:32:00] multiplication as a means of value creation. And so you can have the same amount of impact on your organization, you're just going to measure it differently. And I think over the last couple of decades, there's how many people report to you. Now it's going to be like, what kind of impact can you have?
Now that's not to say that hierarchy is going away by any means. It's just going to be flatter. And the people that we have are going to be more productive. And that's going to be a profound shift. People don't like change. No one does. I don't like change. One of the books that I recommend to everyone. is read this book called, Who Moved My Cheese?
It's this great parable about, you can either resist change and really suffer for it, or you can embrace it and continue to get kind of happy and satisfied. And so it's like a 50 page book. Definitely read it. It changes the way that I think about change as well, our organization does, and it'll be a good thing to do that, but I think for every organization, getting the buy in in your team and realizing this is good for us, for those who adopt it, will thrive.
For those who don't, ultimately you're going to suffer. On the flip side, these things can be

[00:33:00] very kind of hammer and nail y, meaning like If you're a hammer, everything looks like a nail and you're going to be doing agents everywhere. You have to be thoughtful. There's going to be areas where this makes sense and these areas where it doesn't.
So be cautious about over automating areas where human discernment is critical. The last thing I would say is even for the people who are up and coming in college and high school, getting up to speed on these tools is going to be critical because by the time, four years from now, when these incoming freshmen enter the workforce, they're not going to be expected to act and behave like 22 year olds.
They're going to expect to have the skills of maybe someone who has three years more experience because of these tools. And so, become facile with them right now. Get skilled with them. Know how to use them. Because people who know how to use these tools are going to be highly valued and command premium wages because they can have an outsized impact on any organization.
So whether you're a senior manager, a middle manager, Or someone who will

[00:34:00] be entering the work system shortly. The more you embrace these things, the better you're going to be, and it's just going to happen. So, rather than resisting it, run towards it, and you'll thrive and get a premium in the world. So, as you think about how to play to win, not only adapt and embrace change, it's just something that will happen.
I'd recommend you bring in experts. That's been one of the secrets to Blueway success is we drink our own Kool Aid. We use our own ecosystem. So bring in forward thinking, human capital experts, AI experts, digital automation experts. Who can more quickly and effectively position your company ahead of your competition who are probably going to resist change more than you are.
And so if you bring in experts, there's a much higher likelihood that you're going to get it right the first time versus skinning your knee over and over as you kind of recreate this wheel. Once again, we've got really, really good groups that can help you with this that are also priced to be capable and actionable for any kind of lower middle

[00:35:00] market size company and up.
The next prediction that we're making, probably not surprising, is that inflation is going to be stickier than the Federal Reserve's preference. Contributing factors, as you think of this, will be tariff policies. We've got a robust job market. Remember what we talked about? The job market is actually on the hot end of good.
And so the job market is still really good. That doesn't help inflation. We're going to have reduced lower skilled immigration inflows, likely some outflows. And so at the low wage end, It's going to be harder to find those people, which means those costs are going to go up. And overall, we have a pretty strong economy.
And so what that means for inflation is it's going to be harder to get it to come down to that 2 percent target that we talked about. What's going to help that is we're going to have gains in productivity from AI. There's going to be deregulation. That'll provide a counterbalance to some of these pressures.
And at the end of the day, it should, even with sticky inflation, we should have a pretty darn good, if not awesome,

[00:36:00] economic environment. But stay frosty on it, stay agile, watch this. So we think about the opportunities, this is something a lot of people are talking about, but I think that companies that can create differential cost advantages by improving their operations, making them more efficient, and find creative ways to pass savings on to customers.
They're going to have tremendous opportunities to gain market share. I think there's a lot of fatigue over the last several years of companies continuing to pass on dollar for dollar inflation onto the end customer. There will be a tremendous opportunity for those that can improve their operations and then actually lower costs to take share and speak to that fatigue that's out there.
And as a result, I think there's going to be some market share plays that will happen in 2025 in groups that have been forward thinking and proactive on this. So we'll differentially benefit. Now, the risks prolonged inflation could limit the federal reserve's ability to stimulate the market further, i.
e. lower rates. As a result,

[00:37:00] businesses are probably going to get less unaided assistance from. Monetary and interest rate support for their growth. So Don't wait for the tide to come in and rise all boats, like, get your oars out and paddle into shore. Be prepared, like always, to create your own fortune and not just wait for unassisted growth.
And that is true in good environments or bad environments, any environments. Like, take control of your own fate and make things happen and don't wait for others to do it for you. So how do you play to win here? Talk to your customers to find strategic areas of opportunities on your go to market engines.
As we talked about with this inflation pricing strategist, not only in passing it through, but also selectively reducing prices to play the demand elasticity curve. Think about procurement advisors. If you're going to have inflation being passed on to you, how do you take that cost out to lower your costs?
Lean Six Sigma experts. If you can make your operations more efficient, less capital intensive, free up more

[00:38:00] cash, You can do things more aggressively in the market. AI automation experts are also gonna be critical in achieving your objectives. Once again, how do you become more productive? How do you get ahead?
The cheese is being moved. How do you move towards it? When you read the book, you'll know what that means. Once again, BluWave has an ecosystem to help you with all this stuff. You don't have to figure it out yourself. A lot of it you can use AI. You'll be amazed how far you can do just yourself, but when you're ready to activate, if you want some help, we're here to help.
Okay. The last prediction that we have for 2025 is that the economy has been and is entering the next five to seven year growth cycle. The last several years, it's been a tale of two narratives in recent periods. Business services and pockets of retail have thrived, and they're just doing awesome. Well, if you look at manufacturing, financial services, construction, they've actually been in a recession over the last couple years.
Any one of those industries will tell you. And so, net net, we've been growing, but it's been kind of one

[00:39:00] really good, and the other's kind of suffering. But as you pull out those sectors that have been struggling, they've actually been improving throughout all of last year, and strengthening. If you say the recessionary part of the economy, we can map that and see that they're getting better as the time has progressed through last year.
And the business services world, and like that, continue to be good. And so, I think the economic indicators, most pundits are agreeing as well that a soft landing has been achieved. The sustainment of that, obviously, there's things that could get in the way, and there's black swans, etc. Net net, the business of business is in a good position.
The economy has been pretty resilient and it remains healthy, and the areas that were out of favor are now accelerating. Now, the other thing that we've seen, as we mentioned in our private equity priority or the PEP index, is that the private equity industry sees this as well. They've been much more aggressively investing in growth.
Now, part of it is they're kind of trying to will their businesses to get through those tough

[00:40:00] periods. But they're throttling down. They're accelerating for a reason because they see rosier times ahead and they want to be at full speed when everyone else knows it, which is a kind of a hallmark of private equity.
They're usually playing a year ahead of everyone else. And that's what our data has shown time and time again. That's what the return data shows. Just objectively do as they do. And if they're investing in growth, probably means that's going to happen. And it certainly helped us if you look at some of our prior predictions just by seeing what they're doing.
So what are the opportunities for private equity firms that have older portfolio companies in need of monetization? And this means that the market's likely going to be pretty supportive for an attractive enough exit environment in 2025. For those who are making new investments, this is going to create tailwinds, tremendous opportunities to buy at the onset of a nascent economic cycle.
And then with the support from kind of a rising tide that should continue to come in, that should bode well. And ultimately, as you think about the point in time

[00:41:00] we're in. The companies that are acquired in 24 and 25 should be the best vintage deals for any new year. And if you look at any of the studies that have been done, that corroborates that.
Okay, what are the risks? We talked about it at the beginning. This is the stuff everyone tangibly feels. It's the geopolitical tensions that are out there. There's still a lot of complexity in the world. You've got kind of an America first mindset that's coming in. Historically, what that's meant is it's a.
positioning for better deals, but you never know what's going to happen. I think there's going to be some challenges with a reduction in the lower skilled labor supply associated with some of the new immigration policies. That's going to impact warehouse work, agricultural work, construction, those type of things where you really need immigration.
to support the supply of resources for these jobs that are otherwise hard to fill with the local domestic populations. And then the last thing I'd say we have to be mindful of

[00:42:00] is really just continue to keep an eye on the re escalation of inflation as this could disrupt the growth trajectory, impact the Federal Reserve's ability to provide further stimulus as they go from landing a plane to wanting to take off again.
So be agile as always. Be prepared to adapt in the event of an external shock. For anyone who's looked at these things, there's a great tactician named Colonel John Boyd who came up with these called OODA loops, which stands for Observation, Orientation, Decision, and Action. And so you want to, like any time, be prepared to take in information, analyze it, decide what to do, do it, see how it happens, and then iterate rapidly.
If you stay agile, if you stay fast, good things tend to happen more than not. So how do you play to win on this last one? Position your companies for growth. Use private equity grade go to market growth strategists to help accelerate further. Engage recruiters to equip your team with growth minded A players if you don't have them already.
Probably also going to need recruiters to build talent pools for the lower skilled labor supply that's going to be

[00:43:00] impacted. Bring in business intelligence and analytics advisors to help inform and equip your strategies. If you haven't done this, These are also precursor activities in order to enable AI.
You don't have clean data, you don't know where to point it, you haven't analyzed things, you're going to be a hammer looking for nails. And so take that time to organize your data, and then whatever you do with your AI, it's going to work so much better, and it's also going to have huge ROI just in terms of the gamification of your business.
And lastly, as soon as you can, bring in technology, digital transformation, AI gurus to help you enable this new world scale that will be occurring, embrace the future of business, bring productivity to your organization, enable. flatter, more agile organizations. And if you can do that, the world's your oyster.
And so once again, if we can be helpful, we already know who's really good for this stuff. If you have them use them, you can do a lot of stuff yourself. So don't feel like you always got to bring in someone to do things. You can equip yourselves with the

[00:44:00] knowledge, use the AI tools to do that. But if you're really serious about it and you want to get it done the first time without tumbling and stumbling, a lot of times it helps to have safe pair hands on these things.
At the end of the day, I think 2025 is a time to be optimistic, like everything and every time. There's also a lot of scary things that are going on, and I don't want to minimize or trivialize those. But net net is I think about how we're managing our own business and how I see the business builders of private equity are managing theirs.
This is a time to kind of lean in and start hitting the accelerator. Because as we look around the bend in this stop and go traffic that we've talked about at the beginning of this episode, it's starting to open up and there's a path ahead to go faster. I hope everyone has a wonderful 2025. There's a tremendous amount of opportunity ahead.
If you want to know more about any of these things, we just published. BluWave's 2024 Private Equity Insights Report and 2025 Predictions. If you'd like the

[00:45:00] report, feel free to click the link in this episode, or contact any one of our BluWave account executives. Our mission here is to give you a little more alpha and excellence with ease.
And make you more successful as the days, weeks, and years progress. Onward.
That's all we have for today. Please continue to look for the Karma School of Business podcast anywhere you find your favorite podcasts. We truly appreciate your support. If you like what you hear, please follow 5 Star Rate, review, and share. This is a free way to support our show, and it really helps us when you do this, so thank you in advance.
In the meantime. If you want to be connected with the world's best in class, private equity grade professional service providers, independent consultants, interim executives, that are deployed and trusted by the best business builders in the world, including many hundreds of private

[00:46:00] equity firms and thousands of their portfolio companies, and you can do the same whether or not you're in private equity, give us a call or visit our website at BluWave.net. That's B L U W A V E, and we'll support your success. Onward.

Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.

BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.