Identifying Opportunities in Uncertain Environments

Some investors—especially private equity firms and strategic buyers—are leveraging the slower M&A market in several calculated ways: ⸻ 1. Opportunistic Acquisitions at Lower Valuations • Economic uncertainty is compressing business valuations, creating discounted buying opportunities. • Distressed or motivated sellers are more open to flexible deal terms, including seller financing or earnouts. • Buyers with available capital (dry powder) can negotiate from a position of strength. ⸻ 2. Less Competition = More Leverage • With fewer active buyers, those still pursuing acquisitions face less bidding pressure and can take more time in due diligence. • Investors can pursue off-market or under-the-radar deals with minimal competition. ⸻ 3. Focus on Add-On Acquisitions • Platform companies are using this time to make bolt-on acquisitions, integrating smaller competitors to build scale and efficiency. • These deals are often simpler and can be closed faster than large platform transactions. ⸻ 4. Creative Deal Structuring • Investors are using earnouts, seller notes, and performance-based payouts to bridge valuation gaps and reduce upfront risk. • They’re also crafting contingent pricing models tied to future economic recovery or company performance. ⸻ 5. Sector Rotation Toward Resilient Industries • Investors are shifting focus to defensive sectors like healthcare, IT services, and essential B2B services. • These sectors tend to perform better in economic downturns and offer more stable earnings. ⸻ 6. Preparing for a Rebound • Smart buyers are using this period to build pipelines, strengthen relationships, and prepare for faster execution once market confidence returns. • Some are engaging in pre-diligence so they can move quickly when the market shifts.

Private Equity should double down on brand investment during this market uncertainty. The FT noted that private equity firms have noticeably shifted to a "risk off" stance. But "risk off" shouldn't mean shut it all down. In fact, history tells us that marketing and brand investment during times of uncertainty can bring additional asset value when the market does eventually turn. According to research published in Harvard Business Review’s “Roaring Out of Recession”, companies that balanced defensive moves (improving operational efficiency) with offensive ones (investing in marketing, R&D, and new assets) achieved the strongest performance post-recession, with growth rates significantly outpacing companies that solely focused on cost-cutting. Strategic Imperatives for PE Portfolio Companies ------------------------------------------------- For mid-market B2B and high-tech portfolio companies seeking to capitalize on the current environment, consider these priorities: 💪 Strengthen category leadership positioning: When competitors go quiet, define the conversation in your industry through thought leadership, original research, and strategic content marketing. 🔭 Focus on customer retention: Invest in understanding and reducing customer churn. Each retained customer represents significant lifetime value, particularly in subscription-based models common in high-tech. 🏗️ Build differentiation beyond features: In uncertain markets, buyers become more risk-averse. Strong brands reduce perceived risk and justify premium pricing even when budgets tighten. 📈 Optimize the marketing mix: While maintaining overall investment, reallocate budget toward higher-ROI channels and messages that address customer concerns specific to uncertain economic environments. 📐 Align messaging with the moment: Focus on stability, efficiency, and value preservation rather than solely on growth and transformation. #privateequity #pe #brand #marketing https://bit.ly/3EfdO77

In a world of heightened uncertainty, making your own luck has never been more important. KKR’s Mid-Year Outlook for 2025 highlights how—despite recent market volatility from tariff tensions to geopolitical flare-ups—credit markets have demonstrated remarkable resilience. Three key takeaways for credit investors: 𝐅𝐢𝐧𝐝𝐢𝐧𝐠 𝐫𝐞𝐥𝐚𝐭𝐢𝐯𝐞 𝐯𝐚𝐥𝐮𝐞 𝐢𝐬 𝐜𝐫𝐮𝐜𝐢𝐚𝐥: With high-yield spreads near historical tights after quickly recovering from "Liberation Day" shocks, private credit still presents pockets of relative value opportunities, including collateral-backed investments like asset-based finance and parts of Asia credit. In liquid credit, we're seeing compelling opportunities on the margin for shorter-duration CLO liabilities, particularly BB tranches currently offering 300-400bps spread pickup vs. U.S. high yield, with comparable volatility. 𝐂𝐨𝐥𝐥𝐚𝐭𝐞𝐫𝐚𝐥 𝐦𝐚𝐭𝐭𝐞𝐫𝐬: In today's environment, we favor secured cash flows over unsecured beta. Asset-based finance continues to shine as a structural beneficiary of both inflation (boosting hard asset values) and bank de-risking (creating funding gaps). 𝐄𝐮𝐫𝐨𝐩𝐞’𝐬 𝐥𝐞𝐯𝐞𝐫𝐚𝐠𝐞 𝐝𝐢𝐬𝐜𝐨𝐮𝐧𝐭 𝐝𝐞𝐬𝐞𝐫𝐯𝐞𝐬 𝐚𝐭𝐭𝐞𝐧𝐭𝐢𝐨𝐧: European issuers typically run lower leverage yet offer wider spreads than U.S. peers—effectively paying investors a premium for market complexity. As we navigate this "Glass Still Half Full" environment, we believe the key is to climb the capital stack toward secured cash-flows that compensate you for accepting complexity, not leverage. In credit markets where technical factors remain supportive, but dispersion is increasing, this approach could allow investors to truly make their own luck. Explore the full analysis: https://go.kkr.com/44wuMYW

JP Morgan -- Threading the needle: Where markets may be mispricing trade risk We present opportunities in which we identify mispricings that could mean value for investor portfolios. Below, we list three: 1. Domestically focused European corporations: As tariff uncertainty grows, markets that are relatively immune become more attractive. 2. Municipal bonds for tax-sensitive U.S. buyers: The Bloomberg Municipal AAA yield curve has steepened significantly, with the 30-year yield increasing close to 70 basis points year-to-date, reaching levels not seen since the global financial crisis. 3. Private equity secondaries: Dealmaking activity (M&A and IPOs) has been more muted than the Street was expecting coming into the year, in part given uncertainty post–“Liberation Day,” still elevated rates and equity market volatility. The higher probability of prolonged uncertainty has created a cloudier outlook on the pace of a dealmaking recovery in the near term. This is coming at a time in which private equity assets are aging—the median holding period for buyout-backed exits has risen to ~6 years, and global buyout distributions as a percentage of net asset value (NAV) are at their lowest since 2009. These two conditions together are likely to drive an increase in “non-traditional” exits, such as secondaries, which can provide essential liquidity in these markets. https://lnkd.in/eH5ge59k

Are Family Offices Ready for Market Turbulence? Market volatility and persistent uncertainty dominate the current investment climate. Most Family Offices anticipated these conditions and strategically positioned themselves ahead of disruptions. The UBS Global Family Office Report 2025 illustrates how these investors effectively transform volatility into opportunity. Top Risks Family Offices Monitor: • Geopolitical Conflict (52%): Middle East tensions, notably involving Iran, have disrupted energy markets and global supply chains, prompting many Family Offices to recalibrate strategies quickly. • Global Trade War (70%): US-China trade disputes are inflating costs and impacting profitability, making this a top priority for strategic adjustments. Family Offices are proactively addressing potential long-term economic challenges: • Global Recession (53%): Inflation and geopolitical tensions indicate a looming economic slowdown, prompting portfolio adjustments. • Debt Crisis (50%): Interest rate hikes have exposed financial vulnerabilities, leading Family Offices to emphasize proactive debt management. • Climate Change & Market Volatility (48% & 46%): Climate concerns are increasingly central to investment planning and risk strategies. Strategies Family Offices Implement for Resilience: • Active Management (40%): Leveraging experienced managers to navigate market shifts effectively. • Hedge Funds (31%): Using hedge funds to protect assets and secure stable returns. • Illiquid Assets (27%): Investing in private markets to maintain consistent, long-term growth. • Precious Metals & Short-Term Bonds: Diversifying with safe-haven assets like gold (19%) and short-duration bonds (26%) for stability. Despite careful planning, Family Offices face challenges in identifying reliable risk strategies in today's uncertain markets. Their strategic adaptability remains key to long-term wealth preservation. Consider: Is your investment strategy aligned with leading Family Offices? Are you ready not just to withstand, but thrive in turbulence? Success in uncertain times hinges on foresight, flexibility, and preparation. Data adapted from the UBS Global Family Office Report 2025. Context updated for June 2025. This analysis is for informational purposes and is not investment advice.

In times of economic turbulence, most leaders play defense. But what if recession signals are actually your cue to advance? I've just published a new article exploring how market volatility creates unique opportunities for those bold enough to seize them: "In Uncertain Times, the Bold Rewrite the Playbook." The piece examines how forward-thinking executives can: • Transform constraints into catalysts for innovation • Identify competitor vulnerabilities while others retreat • Make strategic moves that would be impossible during stable periods • Build organizational resilience that outlasts market cycles When everyone else is battening down the hatches, the exceptional leaders are unfurling new sails and charting courses into uncontested waters. As Warren Buffett wisely noted, "Be fearful when others are greedy, and greedy when others are fearful." Read the full playbook here: https://lnkd.in/g_8PmrXe I'd love to hear about your experiences navigating economic uncertainty. What counterintuitive strategies have you found effective when markets get rocky? #LeadershipStrategy #EconomicResilience #MarketDisruption #BusinessGrowth #mrx #strategy #growthstrategy