The Revelation Partners team was in Miami March 5-6 for the HPE Miami Conference. The conference, which has become the “go-to” event for private equity sponsors (who can pass up a trip to Miami in March?), brought together thousands of attendees to discuss the current state of the market, emerging trends, and challenges facing the industry. The key themes that emerged from the event highlighted a mix of cautious optimism about the exit environment in 2025, continued liquidity concerns, and creative structuring strategies in an evolving market environment.
We at Revelation have been increasingly active with private equity sponsors and have noticed a significant increase in secondary volume within this market. We remain the only dedicated secondary investment firm with a sole focus on healthcare—a unique advantage that clearly resonated at the conference. Below are some of our team’s key takeaways from our time there.
2025 Outlook: Cautious Optimism Amid Market Normalization
While bankers remain optimistic that 2025 will be a moderately better year than 2024 in terms of exits, private equity sponsors remain cautious. Given the typical private equity investment life cycle, many assets expected to trade this year were last purchased in a “frothy era,” leading to concerns over valuation expectations and bid-ask spread challenges. We are seeing interesting push-pull dynamics between buyers and sellers, but ultimately, we believe there is a chance we see an uptick in M&A activity. Trillions of dollars sit on corporate balance sheets, ready for deployment, and PE firms face mounting pressure to generate liquidity given the average PE hold period now stands at six years[1]. In addition, strategic buyers have been active and are expected to remain involved, including newer entrants to the game such as distributors (e.g., McKesson, Cencora), opening up the buyer pool. Beyond valuations, we are likely to see more processes launched, as bankers have been forecasting a strong pipeline of 2025 deal flow since January at the JP Morgan Healthcare Conference. The key question remains: at what valuations will these assets trade?
Exit Environment: Buyer Priorities and Alternative Paths for Liquidity
A key focus of the conference was on exits and the challenges of selling assets in the current market. Recent private equity vintages have had a hard time generating liquidity – we estimate there is ~$90 billion of capital backlog held in healthcare private equity fund vintages from 2015-2022,[2] which will take significant time to clear even in a normalized M&A environment.
On traditional exits, here are a few of the key focus points from buyers:
- Quality: Sponsors are primarily focused on gaining access to market leaders with solid fundamentals, prioritizing business strength over specific subsectors or specialties. In the current market, there remains a focus on “basics,” including organic growth and developing a sustainable value proposition.
- The “Next Sale” Factor: Buyers are highly focused on how they will eventually exit the business, making long-term growth stories essential.
- Size Matters: Exiting greater than $100 million EBITDA businesses presents unique challenges, requiring structured transactions or alternative buyers. Despite good performance, businesses of this scale can scare away sponsors who can’t get comfortable with the narrowing set of exit options given a challenging IPO market and few sponsors or strategics who can acquire businesses at that scale.
Given these high buyer standards, fund managers are increasingly turning to secondary transactions to generate liquidity for LPs as an alternative to traditional exits. Unlike previous years, LPs are less interested in new deal activity and are laser-focused on exits. They are no longer swayed by high IRRs or MOIC; realized distributions (DPI) matter most. As a result, secondary transactions including continuation vehicles (CVs) have moved from niche to mainstream, with many funds either already having pursued or currently considering a CV. In 2024 alone, GP-led deal volume hit a record of greater than $80 billion (88% YoY growth), with ~80% of that volume attributed to CVs.[3] As one investor put it, “We don’t want to let another sponsor bear the fruits of our labor.” Others are looking at direct secondary, minority, and preferred equity deals as alternative structures for assets that may not trade easily. Given ongoing bid-ask spread dynamics, sponsors are turning to more creative structures.
Sector Trends: Hot Sectors Remain Hot & Contrarian Plays Emerge
There is continued sponsor interest in pharma services (given large pharma budgets that are expected to rebound), healthcare IT (driven by AI), and infusion (assets trading at high teens EBITDA). By comparison, despite strong fundamentals, certain sectors remain out of favor, making exits challenging. For example, Medicare Advantage (MA) was frequently cited as a space where even high-quality assets that are relatively insulated from MA headwinds are stuck in limbo due to shifting investor sentiment. Meanwhile, other sectors such as Physician Practice Management (PPM) have mixed opinions from investors. Many sponsors remain “risk off” in PPM, while others view it as a value play and are focused on identifying the 1-2 top companies for each PPM specialty. Regardless of the subsector, the unpredictability of the Trump Administration and its effects from a regulatory and macro-economic perspective remains a driver of sponsor unease as they evaluate different sectors.
Fundraising Challenges Drive Creativity
Fundraising remains an uphill battle for many PE firms. Overall funds raised for private equity for 2024 was down by almost 25% compared to 2021[4], with many funds falling short of their fundraising targets. Compounding the challenge, megafunds continue to account for the majority of capital raised, and LPs are prioritizing experienced managers, making the environment particularly difficult for mid-sized and smaller funds. This has led to increased reliance on alternative capital sources and creative structuring. For example, fund managers are turning to both existing and non-existing LPs to secure additional capital through co-investment. Funds are also exploring partial liquidity transactions, merging portfolio companies, and using preferred equity deals to get creative around financing solutions. We frequently see sponsors selling marquee assets from other vehicles and stapling them into new funds to attract investor commitments. This is all a sign of one of the most challenging fundraising environments we’ve seen in over a decade.
Final Thoughts
HPE Miami 2025 underscored a cautious yet resilient private equity environment. While liquidity concerns and sector headwinds remain, funds are adapting through creative structuring, building stronger businesses, and focusing on driving exits. As 2025 unfolds, we’ll be watching to see whether the expected healthy exit environment materializes. In all scenarios, we expect creative secondary solutions to become a critical tool in private equity sponsors’ toolkits, serving as an alternative to traditional exits in any market environment.
[1] “Private Equity Outlook 2025: Is a Recovery Starting to Take Shape?”, Bain & Company
[2] Based on Cambridge Associates Venture Capital Index and Benchmark Statistics
[3] Global Secondary Market Review (FY 2024), Greenhill
[4] 2024 Annual Global Private Equity Market Fundraising Report, Pitchbook