Record Capital at Work

Welcome to this week's Capital Call - your Wednesday dose of private market insights without the jargon. At OneFund, understanding market shifts is crucial for making informed investment decisions.

Pour yourself something nice and dive in. 

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🧠 THE BIG IDEA

Record Capital at Work

Private equity's approach to capital deployment tells a story that market commentary often misses. While analysts debate conditions and timing, the industry continues directing record sums toward high-quality opportunities. The best firms don't wait for perfect moments—they create value through strategic selection and operational expertise.

This active approach to investment reveals PE's evolution from opportunistic financial buyer to strategic capital partner. When quality assets command premium valuations, it signals confidence in long-term value creation rather than market distress.

📈 MARKET MOVERS

• 🏢 Blackstone Powers Grid Transformation with $1.6B Deal
  Blackstone's Energy Transition Partners acquired electrical services leader Shermco Industries for $1.6 billion, including debt. With 600+ field technicians across North America serving semiconductors, data centers, and manufacturing, Shermco represents infrastructure essential to electrification trends. The acquisition follows Blackstone's $6 billion Enverus purchase and continues the team's focus on energy transition investments under Senior Managing Director David Foley.
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• 💰 Neuberger Berman Approaches $5B Secondary Fund Close
  The New York manager expects to raise at least half its $5 billion secondary fund target by year-end, building on $4 billion already raised for related strategies. Executives will commit minimum $50 million of their own capital. Secondary transaction volume surged 51% year-over-year to record $103 billion, while secondary funds raised $43 billion in H1 2025 despite challenging fundraising conditions.
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• 🔧 Thoma Bravo's SaaS Innovation Blueprint
  The firm's $1.2-1.5 billion acquisition of Verint Systems demonstrates PE's role in AI-driven SaaS transformation. With Verint's 24% AI ARR growth and Thoma Bravo's operational optimization expertise, the deal reflects broader PE trends toward market consolidation and AI-centric value creation in software sectors requiring capital and expertise for competitive positioning.
  Get the insights →

🔍 DEEP DIVE

Record Megadeals Reveal PE's Strategic Evolution

While market commentators debate exit timelines and deal flow, private equity quietly deployed $145.33 billion across just 12 megadeals in the first eight months of 2025. The industry is on track to surpass 2021's record $230.29 billion in transactions worth $5 billion or more. The pattern reveals capital concentration on specific targets rather than broad market deployment.

Why $25x EBITDA Makes Economic Sense

The numbers show a clear divide in transaction activity. Megadeal value surged 16% year-over-year while smaller transactions under $250 million declined 6% to $13.96 billion. This reflects how PE firms allocate capital during uncertain periods.

Ron Kahn at Lincoln International explains the calculus: "If you're a little bit concerned about getting into a deal today because nobody really knows what's going to happen tomorrow, you want to go for those larger companies." Enterprise valuation multiples for new buyouts averaged 11.9x EBITDA, while top assets commanded up to 25x EBITDA.

When PE firms pay 25x EBITDA, they're willing to pay higher multiples than competitors who can't generate the same improvements through management changes. These valuations reflect competition for assets where fund managers believe they can create value through active involvement.

The AI Premium in Action

Technology, media, and telecommunications companies attracted three megadeals each, accounting for half of all $5 billion-plus transactions. Scott Moss of Cherry Bekaert Advisory notes that "if it's anything around AI, the multiples there are eye-opening."

This sector concentration shows PE firms backing technologies where they can apply expertise, not just follow market trends. Thoma Bravo's $12.3 billion Dayforce acquisition illustrates this approach—targeting software platforms where they bring experience in scaling and optimization.

Geography tells a similar story. The US and Canada produced eight of the 12 megadeals, twice as many as all other regions combined, reflecting regulatory environments that enable complex transactions.

When Financing Creates Market Structure

Private credit markets created a divide between large and small deal activity. Credit firms became cautious about smaller PE-backed transactions, requiring higher equity contributions that slowed middle-market dealmaking. Meanwhile, megadeals continued attracting financing as lenders view larger companies as more predictable.

This financing environment rewards scale and track record. PE firms with established processes and lender relationships can access capital for complex transactions, while others face constraints. The result is a market that favors capability over pure financial engineering.

The Tell: Operational Focus at Scale

What characterizes these megadeals is their focus on improvement rather than financial arbitrage. Modern megadeals combine financial resources with industry knowledge and capabilities. The valuations reflect expectations of value creation through active management rather than leverage optimization alone.

Here's the tell: when PE firms pay premiums for established businesses, they're betting on their ability to create value that financial buyers cannot. This thesis increasingly defines how the industry approaches large transactions.

What This Means Going Forward

The megadeal activity shows PE's evolution toward longer-term value creation. While public markets focus on quarterly performance and smaller deals face financing constraints, PE continues deploying capital toward improvements that require time to develop.

For investors evaluating PE allocations, this activity demonstrates how the industry operates across different market conditions. The focus on assets and improvement reflects how PE managers approach portfolio construction during uncertain periods, with implications for how investors think about PE in diversified portfolios.

🧰 TACTICAL TAKEAWAYS

• Focus on operational value creators when evaluating PE managers. Rather than chasing the latest trends or sector themes, prioritize firms with proven track records of hands-on portfolio company development. Look for managers who demonstrate systematic approaches to business improvement—technology upgrades, market expansion, operational efficiency—rather than those relying primarily on financial engineering or market timing.

• Diversify across capability-driven managers instead of concentrating on single sectors or geographies. Successful firms like Warburg Pincus succeed through operational expertise that translates across industries. This approach reduces concentration risk while maintaining focus on the value creation skills that generate returns, regardless of whether you're investing in healthcare software or industrial equipment.

• Evaluate exit execution during due diligence by analyzing how managers prepare portfolio companies for eventual sales. The best firms don't just wait for favorable market conditions—they position companies strategically years before exit. Look for evidence of systematic value creation programs and track records of achieving premium valuations even during challenging market periods.

🧵 WEEKEND READS

(Because some light market analysis pairs wonderfully with Saturday coffee)

• 🏛️ Wharton Experts Support PE in Retirement Plans
  Academic directors from Wharton's Harris Family Alternative Investments Program argue that private equity could transform retirement savings if properly structured with liquidity protections and transparency requirements. They recommend 15% allocation caps, professional oversight, and clear disclosure standards to balance opportunity with investor protection as Trump's executive order encourages 401(k) access.
  View the analysis →

• 🌍 European PE Shows Resilience in H1 2025
  European deal activity increased 2% year-over-year with healthcare, industrials, and financial services leading growth. Infrastructure funds captured approximately 50% of European capital raised, while secondaries fundraising exhibited growth trends. Nordic countries gained market share as Germany, Italy, and Spain declined. The region allocated over €150 billion for AI opportunities over five years.
  Get the insights →

• 💼 Warburg Pincus Delivers Record $10B to Investors
  The renowned tech investor returned nearly $10 billion to investors in 2025, a firm record driven by strategic exits including healthcare software company Modernizing Medicine's $5.3 billion sale to Clearlake Capital. Other successful exits included heat pump maker Sundyne to Honeywell International and HR software provider Neogov to EQT. The performance demonstrates how operational expertise drives consistent returns across market cycles.
  Read the strategy →

👋 WANT IN?

In these turbulent times, understanding the nuances of private market investments is more crucial than ever. Schedule a discovery call with OneFund further discuss private equity and the current market.

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The OneFund Team

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