Takeaways

• Alvarez & Marsal’s latest report shows private equity (PE) in Australia adapting to tariff pressures, trade disruptions, and geopolitical volatility while remaining optimistic about growth.
• Value creation and AI adoption have emerged as central strategies, with 95% of funds focusing on operational excellence.
• Despite challenges like capability gaps and capacity constraints, private equity continues to drive productivity and economic resilience in Australia.

Global professional services firm Alvarez & Marsal (A&M) has released a new report analyzing Australia’s private equity (PE) landscape in 2025. The findings show how funds are navigating macroeconomic volatility while accelerating investment strategies that support long-term growth and align with environmental, social, and governance (ESG) goals.

The report highlights that while Australian PE funds face challenges from tariffs, geopolitical tensions, and extended holding periods, confidence remains strong. Around 68% of surveyed investors expressed optimism about exit prospects in the next three years.

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Tariffs and Trade Shape Portfolio Strategies

Tariffs continue to reshape portfolio decisions. According to the report, 55% of respondents are still pursuing acquisitions but with sharper scrutiny of tariff impacts. Meanwhile, 28% are accelerating value creation initiatives to counter rising costs. Funds are also reshoring supply chains and exploring alternative sourcing to reduce risk, support ESG priorities, and build resilience against global trade disruptions.

AI Adoption Gains Momentum

Technology is emerging as a critical lever for growth. Around 50% of funds are already using artificial intelligence in pre-deal diligence and post-deal operations. From risk identification to efficiency improvements, AI is becoming a standard tool in the PE playbook, helping firms deliver operational excellence while meeting ESG and compliance objectives.

Obstacles to Execution Persist

Despite strong momentum, execution challenges remain. Capability gaps (82%) and capacity constraints (69%) continue to hinder value creation plans. This highlights the importance of attracting specialized expertise to capture both financial and ESG-driven opportunities fully.

Value Creation as the Core Strategy

The strongest theme in the report is the centrality of value creation. A&M notes that 95% of funds consider it the foundation of their investment thesis. Around 74% are pursuing a dual strategy, boosting revenue growth while reducing costs. As Managing Director Timo Schmid explained, “Value creation is no longer just a lever for growth; it is the foundation of private equity success in today’s market.”

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Driving Australia’s Economic and ESG Growth

Despite a challenging backdrop, the report positions private equity as a catalyst for Australia’s economic resilience and ESG advancement. By incorporating tariff and trade considerations into their strategies, adopting AI, and aligning with ESG principles, PE funds are strengthening productivity, competitiveness, and sustainable growth across industries.

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Source: Alvarez and Marshal