Looking Ahead: 4 Things We’re Watching in 2025
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Looking Ahead: 4 Things We’re Watching in 2025
As we head into 2025, software and technology in private equity is filled with anticipation. There continue to be trends unfolding, offering exciting possibilities. Here's a glimpse into the four key areas we’re watching closely and eagerly awaiting in the new year:
1. The Future of AI: Evolving Opportunities
The continued evolution of artificial intelligence (AI) and machine learning will reshape how private equity firms and their portfolio companies operate. In a Bi-Weekly Bloom newsletter last year, highlighted how advancements in Generative AI present exciting opportunities for PE-backed SaaS companies, such as accelerating product development through automated code generation and testing, as well as enhancing customer experiences with AI-driven personalized support and proactive engagement. AI-driven automation, from predictive analytics to customer service chatbots, promises to unlock significant efficiencies. Tools powered by AI are also transforming deal sourcing and investment due diligence, helping private equity firms identify and evaluate opportunities with greater speed and accuracy. AI is making waves to streamline operations, improve decision-making, and accelerate growth for businesses across all sectors, but what will its ultimate impact be in 2025? Will concerns about intellectual property and job displacement create roadblocks? As AI continues to grow in influence, we’re curious to see how it will reshape the software space, and how regulators and businesses will adapt to its rapid evolution.
2. The Impact of the New U.S. President on the Software Space
With the upcoming presidential election, there’s a palpable sense of anticipation how the new administration’s legislative policies will impact the technology sector. The new administration could prioritize rolling back tech regulations, easing compliance burdens for software companies, and fostering an environment for innovation. Adhering to data protection regulations like the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) has imposed substantial costs on companies, which would be greatly reduced if these regulations were rolled back. However, concerns around data privacy and cybersecurity could still lead to increased scrutiny, especially as these issues become more prominent globally. The establishment of the Department of Government Efficiency (DOGE), led by Elon Musk and Vivek Ramaswamy, aims to streamline federal operations using advanced technology. This initiative could influence government tech policies and create new opportunities for software companies specializing in efficiency solutions. These policy shifts might also impact departmental budgets and procurement processes, driving demand for software that reduces costs and optimizes operations across government agencies. On the international front, Trump’s past stance on limiting foreign investments in U.S. tech companies and focusing on domestic job creation might resurface, potentially reshaping M&A strategies. While much remains uncertain, these potential policy directions are already fueling discussions about the future of technology and private equity.
3. The Evolution of Data Privacy Regulations: Preparing for New Challenges
As data privacy continues to rise as a top concern, we expect even more regulatory changes in 2025. With governments across the globe tightening rules on data sovereignty and privacy, tech companies will face increased pressure to adapt. In addition to regional differences in data protection laws, emerging regulations like the Digital Services Act in the EU and potential changes in U.S. data privacy frameworks could create even more complexity. Will these regulations become more harmonized, or will we see a fragmented global landscape? How will private equity firms navigate this shifting terrain, ensuring their portfolio companies stay compliant while managing data across borders? Navigating these challenges will require strategic investments in data governance and cross-border compliance solutions, with firms needing to assess and possibly restructure their operations to align with changing regulatory frameworks.
4. Will the Shift Toward “Tuck-In” Acquisitions continue in 2025?
The SaaS industry is continuing to realize rapid consolidation, with larger players acquiring smaller, niche companies to strengthen their product offerings or expand into new markets. In 2024, private equity firms, in particular, leaned into smaller, strategic "tuck-in" acquisitions as a way to rapidly scale portfolio companies. Bain and Company highlights that this trend has become a defining strategy in today’s market, with more than double the add-on deals compared to platform deals across M&A transactions in 2021 with firms completing 2.7 add-ons per buyout in Q1 2024. But will this trend gain momentum in 2025, especially given uncertain market conditions? While these acquisitions can create strong competitive advantages, they also come with risks, such as integration challenges and cultural mismatches.
Conclusion: A Year of Opportunity and Uncertainty
While these areas represent exciting opportunities, the future of the software and technology sectors in private equity remains dynamic and full of uncertainty. We’re watching closely, ready to adapt, and eager to see how 2025 plays out. The next 12 months are sure to bring new challenges, trends, and opportunities that will shape the future of our industry.
Stay tuned, and let’s make 2025 a year of growth and innovation!'
Join Our Team: We’re Hiring Senior Associates
We’re excited to announce that we’re hiring our next cohort of Senior Associates to join our dynamic team in New York. As we continue to build a best-in-class investment platform in the lower middle market, we’re looking for ambitious, driven individuals who are eager to make a meaningful impact and contribute to our team’s success. If you’re ready to take the next step in your career and work alongside a talented group of professionals, we’d love to hear from you. See full job posting and apply here.
About Bloom Equity Partners
We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below. We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.
Our Investment Criteria
Industry: B2B Software and Technology-Enabled Companies
Geography: North America, Europe, Australia and New Zealand
Revenue: $5M - $50M
Growth: No requirement
Profitability: Negative - $10M EBITDA
Investment Type: Operational control required
If you or someone you know is considering selling or investing in their business, we would love to learn more! Check out our referral partner program, which compensates referrers for introductions that lead to affirmative outcomes.
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