What Private Equity Wants from Small Businesses in 2025

What small business owners need to know about valuations, tariffs, and navigating today’s uncertainty 

Private equity firms still want to do deals in 2025, but they’re far more cautious, and for good reason. 

Over the past few months, we’ve seen a sharp decline in private equity (PE) activity, even for strong small businesses that might’ve been snapped up just last year. If you’re a business owner hoping for a clean exit through PE, you need to know what’s changed and how to position your business for when the market rebounds. 

 Why Private Equity Deals Are Slowing in 2025 

We used to see the occasional small business getting acquired by private equity, but a few years ago that picked up. Then, suddenly in the past couple of months, everything stalled. It’s not just your business. It’s across the board. 

What’s driving the slowdown? 

• Political transitions tend to bring economic uncertainty, and this year is no different. Whether you like the current administration or not, most folks agree: uncertainty is higher than it’s been in a long time. 
• PE firms hate uncertainty. They want predictable returns. If what looked like a great business a year ago now seems risky, they’re hitting pause. 
• Global trade dynamics are disrupting supply chains, pricing, and ultimately valuations. 

A Real-World Example: How Tariffs Can Tank Valuations 

Take a client of ours who had a solid business selling, in part, imported goods to U.S. universities. Great margins, stable customer base, years of profitability. 

Then: 

• Tariffs on Chinese imports shot up dramatically, then went down, but not to where they were. 
• Universities lost access to US government funding. 
• Orders dropped off. Costs skyrocketed. 

Now, that same business looks volatile on paper. It’s not the owner’s fault—but from a PE firm’s perspective, it’s a risk they can’t afford. 

Missed the video? Watch it here.

3 Traits That Still Attract PE Firms in 2025

If you’re still hoping to attract PE interest, here’s what they do want right now: 

• U.S.-based sourcing. If your goods come from domestic suppliers, you’re immediately more attractive. 
• Insulated customer base. Are your customers shielded from policy or economic swings? That matters more than ever. 
• A clear 7-year ROI path. PE firms typically want to exit within 7 years. If recovery takes 3 of those years, they’re almost out of time to realize a return. 

You need a story. One that clearly explains why your business is stable despite the broader uncertainty. 

Private equity isn’t just buying numbers. They’re buying a story that holds up under pressure. 

How Chinese Manufacturers Are Bypassing U.S. Tariffs (and Why It Matters to You) 

Here’s something you won’t read in a press release: Chinese companies have been quietly routing goods through Mexico and Vietnam to avoid tariffs. They set up factories there, re-label products, and legally import them into the U.S. without the full tariff weight. 

This worked under the first wave of tariffs, and we’re already seeing signs that it’s happening again. So while goods will still arrive, it’ll be through more complicated and, often more expensive, supply chains. 

Is Now the Right Time to Sell Your Business? 

Maybe. If your business is strong and you can weather the next 12–24 months, you might find yourself in a better position when PE firms start deploying capital again. But don’t assume a better payday is guaranteed. 

What’s more likely: pent-up demand will surge, and the line to get a deal done will be longer. That could drive valuations up… or lead to more selectivity. 

Key Takeaways: How to Protect and Grow Your Business Value 

If you're aiming for a PE deal, or you just want to stay prepared, you need a clear picture of how your business would look through an investor’s eyes.

Start with your story. 
Can you explain—credibly—why your margins, customers, and supply chains won’t get rattled by what’s happening globally? 

Then, look at your numbers. 
Your financials aren’t just documents—they’re the first impression investors get (read your business’s curb appeal). 

If your financials don’t hold up, the rest of your pitch doesn’t matter. 

Deals are still getting done. Just fewer of them, with more scrutiny. 

Want to Make Your Business More Valuable?  

Even if you’re not planning to sell tomorrow, it pays to understand what makes your business more valuable and what could hold it back. 

Building value takes intention. If you’re ready to explore what’s possible and whether we’re the right team to support you, book a discovery call and tell us about your business.