Private Equity in 2025: Leveraging AI for Smarter Investments

More companies are considering the merits of private equity investment due to an inability to attract enough talent or manage the speed of change in regulatory compliance and technology. Particularly with higher lending rates and competition by larger, global competitors, company leaders view PE as the answer for sophistication, better service and improved margins in the long run.

However, PE firms have their own challenges to offer value, security and speed in the age of AI. PE leaders need to anticipate threats to the technologies they use along with threats to their operational business relationships. This requires a robust framework of AI due diligence that enhance decision-making and mitigate risks throughout the investment lifecycle.

2025 Business Outlook Report

The 106-page 2025 Business Outlook Report breaks down the biggest shifts happening right now.

2025 Business Outlook Report from LBMC

Marketing Form

First Name Last Name Email

By clicking submit, you agree to the privacy policy.

“The tech sector keeps pushing boundaries, driving both innovation and economic growth, thanks to strategic M&A activity. Looking ahead to 2025, private equity firms are well-positioned to ride this wave by focusing on programmatic acquisitions and fine-tuning their portfolios. These strategies help companies stay nimble, manage risks more effectively, and create lasting value in a market that’s rapidly evolving with breakthroughs in AI and sustainability.”
BRIAN MARYNOWITZ, SHAREHOLDER, TRANSACTION ADVISORY SERVICES, LBMC, PC

1. Cybersecurity and AI

Cyberthreats continue to be a concern, and just as with any emerging technology, AI brings its own challenges. Many security professionals have gotten comfortable with the in-house risk of generative AI (GenAI), as long as organizations establish policies on its usage and get “enterprise” instances of the platforms where possible. This ensures entries or “prompts” that could have sensitive information stay within the corporate environment.

PE firms that leverage AI in their solutions are encouraged to evaluate their existing vendor contracts. Do those contracts cover AI? If they were written before late 2022, then it’s unlikely AI is addressed. As a basic exercise, think about software-as-a-service (SaaS) products you or your portfolio companies depend on for everyday operations. Now go to their website, and their product’s use of AI is likely mentioned on their homepage, yet you did not agree to its use in your contract. It’s time to challenge those vendors and understand how they are securing your data exposed to their AI models, and ensure limited disruption in the event of a cyberattack.

Cybercriminals have advanced tools that leverage AI at their disposal, allowing them to attack multiple targets at once without touching a keyboard. These AI models are trained to adjust their approach and try different attack methods without human involvement. The tools and resources required to combat this are expensive, and firms looking to invest in companies should consider these expenditures as a requirement to do business.

2. Dealmaking and AI

AI tools are becoming increasingly valuable for PE dealmakers pre- and post-close. They are used for deal sourcing and evaluation by analyzing large amounts of data to identify investment opportunities, and they enhance the due diligence process by pulling information from documents to provide insights and answer queries. They assess financial statements, thus uncovering trends that indicate risks or opportunities. They also add value to the portfolio management process by aggregating KPIs across portfolio companies to improve visibility into the business, helping PE firms act when they see negative trends.

AI is gaining momentum with middle-market companies in general. Robotic process automation tools increase operational efficiency by automating routine tasks, reducing errors, and freeing up employees for more strategic work. AI is being integrated into customer relationship management systems to improve sales strategies. Chatbots and virtual assistants enhance customer service, while predictive financial modeling simulates financial scenarios, which helps with budgeting and investment decisions.

“While AI is not a new phenomenon in technology or healthcare, GenAI is knocking down the walled gardens of our data history. Tools with the greatest impact are those partnering with firms not only interested in aggregating volumes of data for its potential value, but those utilizing inference for value in ways only GenAI can offer.”
MATT CYBULSKY, PRACTICE LEADER, HEALTHCARE AI, DATA, AND PRODUCT INNOVATION, LBMC, PC

3. AI Use Cases by Sector

No two industries will use AI in the exact same way. This creates challenges for PE firms to create efficiencies of scale across their portfolio.

In manufacturing, these applications help with predictive maintenance, inventory, production, and quality control. In the retail and e-commerce industries, AI personalizes marketing and develops customer recommendations to drive sales and loyalty. Financial services organizations often use AI for fraud detection and risk assessment. For technology companies, AI supports product development by accelerating the coding process and providing insights into user behavior.

It’s important to note that AI requires clean, organized data, so investing in a data warehouse is paramount, but the up-front cost will pay off dividends in the long run. Companies must also monitor regulations surrounding AI adoption to ensure compliance.

“What is purported versus what is possible with AI makes a difference between the long-term winners and losers. The biggest risk isn’t a lack of efficiencies, but the perception of consumers’ satisfaction and loyalty—in healthcare cases it’s also centered upon safety and quality.”
MATT CYBULSKY, PRACTICE LEADER, HEALTHCARE AI, DATA, AND PRODUCT INNOVATION, LBMC, PC

4. Value Creation in Healthcare

The pervasive discussion during the past two years for healthcare companies has been talent retention and the significant margin pressure being experienced from rising wages. Focus on enhanced benefits, developing a patient-centric culture, increased training, and creating opportunities for advancement are some of the key tactics midsized providers can use to address this significant challenge across the industry.

Another key tactic utilized by midsized providers to drive value creation is investment in data strategy. Ongoing assessment of key performance indicators (KPIs) is a bare minimum requirement to even have a fighting chance at driving value. Firms that invest in technology stacks along with data aggregation and visualization tools have a much better chance to develop strategies to grow revenues, improve margins, and operate more efficiently and effectively, and they achieve higher exit multiples than less sophisticated competitors.

5. Underrated Healthcare Factors

Factors that can never be underrated for healthcare companies include a focus on compliance and usage of technology. One of the most common reasons for failed transactions in healthcare relates to compliance issues. Lack of emphasis on proper documentation, improper coding, and incident-to billings are a few items that can turn a company into an untradeable or difficult-to-sell asset. Many groups may not be willing to invest in compliance programs and training, but PE-backed firms have enhanced their emphasis on compliance as part of their risk management strategy while simultaneously improving charge capture.

Many companies may not develop a robust use of technology because “that’s the way we’ve always done it, and we’ve been profitable.” One of the arguments that supports the existence of private equity in healthcare is the willingness to invest in technology and tools, which often will achieve a better emphasis on the patient and outcomes while assisting in improved financial results. Independent practices should consider how to implement some of the tools and practices utilized by PE as a way to ensure continued stability and allow themselves to control their own destiny for future growth.

Outlook - AI is a Critical Component of PE Strategy

Investment in AI will be neither easy nor cheap when weighing opportunities or reconciling such investments against the bottom line. Whether focusing on regulatory compliance, cyberthreats or the timing and application of AI in business, PE leaders and their advisors are walking new territory.

What is known is that AI is a critical component of current and future PE strategy. Even as new industries are opening up to PE investment, their challenges and opportunities to adopt and apply AI are multi-layered and complex. Once AI adoption begins to show benefits in a sector, that is when knowledge can be shared across the portfolio companies.

But make no mistake; AI is a long game—one that rewards foresight, persistence, and a commitment to innovation.

Acknowledgments

We extend our gratitude to the following for their invaluable insights and expertise. Their contributions have provided a clear and actionable perspective on the evolving role of AI in private equity strategy.

VAN STEEL, SHAREHOLDER AND HEALTHCARE INDUSTRY LEADER, CYBERSECURITY, LBMC, PC
JON HILTON, SHAREHOLDER AND PRACTICE LEADER, CONSULTING AND BUSINESS INTELLIGENCE, LBMC, PC
BRAD BONDE, SHAREHOLDER, TRANSACTION ADVISORY SERVICES, LBMC, PC

2025 Business Outlook Report

1. Cybersecurity and AI

2. Dealmaking and AI

3. AI Use Cases by Sector

4. Value Creation in Healthcare

5. Underrated Healthcare Factors

Outlook - AI is a Critical Component of PE Strategy

Privacy settings

With the slider, you can enable or disable different types of cookies:

This website will:

This website won\'t: