Private Equity in Technology: A Forward Look into 2025

Published: Jun 6, 2025
By: Arpita Shah; Kaitlyn Gill
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As we move toward the second half of 2025, private equity (PE) investment in the technology sector stands at a strategic inflection point. While macroeconomic and political volatility continue to shape global markets, PE funds remain aggressively positioned toward technology, especially in verticals like artificial intelligence (AI), cybersecurity, cloud infrastructure, and enterprise software. Let’s explore how tech-focused PE could unfold in 2025 under the Trump administration, along with interest rate policies, tax and regulatory shifts, and ongoing global tensions.

2025: A Year for Tech-Focused Private Equity

After a volatile 2023 and a stabilizing 2024, the technology sector continues to attract disproportionate attention from PE investors. In Q1 2025 alone, PE deal volume in technology remained robust, though valuations showed more discipline^1,2:

Q1 2025 Tech PE Deal Volume: $35.7 billion across 224 deals (down 9.5% YoY, but still 27% above the five-year quarterly average).
Top Segments: AI (especially AI-as-a-Service platforms), DevOps software, and vertical SaaS remain the highest growth categories.
Median EBITDA Multiples: 12.4x for software compared to 14.8x in 2021, reflecting a continued correction toward long-term averages.

Trump Administration: Deregulation, Tariffs, and Deal Dynamics

The return of President Donald Trump to office has ushered in a deregulatory climate that could favor M&A activity:

Antitrust: A more business-friendly Federal Trade Commission is expected to ease scrutiny on mid-market tech mergers, which could spur roll-ups in fragmented software categories (e.g., HR tech, legal tech).³
Tariffs: Renewed tariffs could increase supply chain costs for tech firms—especially hardware and IoT-heavy platforms. PE firms may respond by reshoring or backing domestic component manufacturers.⁴
Strategic Partnerships: Cross-border deal making with EU and APAC partners may intensify as firms look to hedge geopolitical exposure.⁵

Outlook: Expect an uptick in PE-led, take-private deals for undervalued public tech companies, particularly those with US-based operations and clear profitability paths.

Interest Rates

Throughout the first quarter of 2025, interest rates have been decreasing. This trend is beneficial to early-stage technology companies, as lower interest rates typically reduce the cost of debt for PE firms and contribute to better valuations.⁶
In May 2025, the Federal Reserve (Fed) noted the range for the federal funds rate would be maintained in the target range of 4.25% to 4.50%. Going forward, the Fed is monitoring both unemployment metrics, the effects of tariffs, and inflation metrics to manage the future rate adjustments.⁷

M&A and Exit Environment

The exit market for tech PE remains cautious, with IPO windows only modestly reopening. Q1⁸ 2025 saw:

Only six PE-backed tech IPOs, raising $2.1 billion total.
Secondary buyouts still dominate exits (64% of Q1 activity), reflecting a still-challenging public markets environment.⁹

Outlook: As public markets stabilize and cost of capital normalizes, late 2025 may mark the return of strategic acquirers—particularly hyperscalers and global enterprise tech firms looking to expand AI capabilities.

Tax Policy and Carried Interest Reform

2025 is shaping up to be a critical year for PE tax policy. Under the current administration:

Carried Interest: The Trump administration, supported by a Republican majority in Congress, is considering repealing or relaxing the three-year holding period rule instituted under the 2017 Tax Cuts and Jobs Act. If passed, GPs may no longer need to hold an investment for three years to receive capital gains treatment. This could encourage quicker exits and more flexible fund structuring.10
Corporate Tax Rate: Proposals to reduce the corporate tax rate from 21% to 18% are under discussion. This could increase net income for portfolio companies, raising potential exit valuations.11
Risk: If political control shifts in the 2026 US midterm elections, these tax advantages may reverse quickly.

PE Strategy Shift: Expect more quick-flip investments, higher GP appetite for shorter-term alpha, and renewed interest in growth equity strategies that capitalize on tax-advantaged compounding.

Looking Ahead: Key Themes for 2025 and Beyond

Here are few predictions for how the rest of 2025 could shape PE activity in tech:

AI-Driven Consolidation: PE will continue consolidating AI infrastructure and tooling players to create full-stack automation platforms.
Cybersecurity: As data privacy laws evolve, mid-sized cybersecurity companies will become hot acquisition targets.
Take-Private Boom: Valuation gaps between public and private markets will keep fueling take-private deals—especially for legacy tech firms with stable margins but undervalued stock prices.
Secondaries Expansion: Liquidity constraints among LPs will lead to record activity in the tech-focused secondaries market.

Conclusion

While 2025 offers tailwinds in the form of deregulation and sector-specific growth in tech, the era of “easy money” and outsized valuations is behind us. For technology companies seeking capital, aligning with PE sponsors that bring operational expertise—not just capital—will be critical. And for PE investors, the next 12 to 18 months will test discipline, innovation, and patience in navigating a reshaped landscape.

¹https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/2/private-equity-and-venture-capital-deal-value-nudges-down-in-january-87451366

²https://firstpagesage.com/business/valuation-ebitda-multiples-for-tech-companies

³Mega-deal truce augurs gentler trustbuster norm | Reuters

⁴Trump's tariffs to curb US economic growth while reducing deficit: CBO report

⁵Trump’s presidency: How will deregulation shape up and trade policies play out?

⁶Fed rate decision May 2025: Fed holds rates steady

⁷Federal Reserve Board - Federal Reserve issues FOMC statement

⁸Q1 2025 Global PE First Look | PitchBook

⁹Global Private Markets Report 2025 | McKinsey