Episode 136
Private Equity 2025 Insights and the 2026 Deal Cycle Outlook
Sean Mooney, Founder and CEO of BluWave, shares the key takeaways from BluWave’s 2025 Private Equity Insights Report and what they signal for the year ahead. Drawing on real-time data from hundreds of PE firms and thousands of portfolio companies, he outlines how the industry shifted from defense to offense, why diligence and value creation surged late in the year, and what separates winners from laggards entering 2026. Sean also delivers clear predictions on AI adoption, talent, software sprawl, and the accelerating deal rebound. This episode sets the context every private equity leader needs before leaning into the next cycle—press play.
Episode Highlights
0:58 – Why private equity shifted from defense to offense in 2025
4:48 – What GDP, inflation, and productivity data revealed about economic resilience
9:59 – The 41% diligence surge and why it’s a leading indicator for deal flow
12:36 – Human capital’s comeback and what new deals signal for leadership hiring
18:20 – 2026 predictions: AI moves from buzzword to execution tactic
27:58 – Avoiding AI pilot purgatory and prioritizing adoption that actually delivers ROI
37:21 – Why dry powder, LP pressure, and speed will define the next PE deal cycle
For more on BluWave, visit: https://www.bluwave.net/
To request the full Q4 2025 Insights Report, visit: https://www.bluwave.net/insights-report/
Episode Highlights
0:58 – Why private equity shifted from defense to offense in 2025
4:48 – What GDP, inflation, and productivity data revealed about economic resilience
9:59 – The 41% diligence surge and why it’s a leading indicator for deal flow
12:36 – Human capital’s comeback and what new deals signal for leadership hiring
18:20 – 2026 predictions: AI moves from buzzword to execution tactic
27:58 – Avoiding AI pilot purgatory and prioritizing adoption that actually delivers ROI
37:21 – Why dry powder, LP pressure, and speed will define the next PE deal cycle
For more on BluWave, visit: https://www.bluwave.net/
To request the full Q4 2025 Insights Report, visit: https://www.bluwave.net/insights-report/
EPISODE TRANSCRIPT
[00:00:00] Sean Mooney: Welcome to the Karma School of Business, a podcast about the private equity industry, business best practices, and realtime trends. I'm Sean Mooney, BluWave's founder and CEO. In this episode, we have a special episode where we discuss what we're seeing amongst the best business builders in the world via our 2025 private equity insights report.
[00:00:25] Enjoy.
[00:00:36] All right, everyone, buckle up. We have an exciting 2026 ahead of us. Today we have a special episode where I'm going to talk a little bit about why I'm so excited about this year, and it largely started last year. Today we're going to cover the latest BluWave fourth quarter 2025 Private Equity Insights report.
[00:00:58] The report covers a lot of things that I think our listeners are going to find interesting. One, we're going to talk about the major themes that unfolded in 2025 amongst the best business builders in the world, the private equity investors who are as proactive and resilient and tenacious and forward-looking as you get with a high degree of expected value in their outcomes.
[00:01:20] And so when we look at what PE does, it's generally a good consensus read on what the rest of the economy will do and should do earlier than later. We're going to talk about how the themes in 2025 are going to roll forward and have a big impact on 2026. So we're going to make our annual 2026 projections. Then we're going to go back in time and dare to look at how we predicted the world would happen in 2025.
[00:01:44] And spoiler alert, with humility, we crushed it. And part of that is because we have this, all this amazing data from the best business builders in the world, which helps us see the future. So this is going to be a really good one. I'm excited to jump right in. So let's talk about what the big themes were in 2025.
[00:02:02] And I was reflecting on the data that we've locked in. The report that we've written, it made me think as I think people know who know me and listen to Karma School of Business, I grew up in Texas. I only know how to think metaphorically. It's a strength but also a weakness. I can't have like straight conversations with people without using the word 'like' and 'as' and some people get annoyed, but anyways, it is what it is.
[00:02:24] I am who I am at this point. And so as I was thinking about last year, it started making me think about all these eighties and nineties movies I used to watch, like Rocky and Karate Kid. And you name these kind of like protagonists that have to overcome adversity and then ultimately succeed. I think about last year it unfolded like a lot of these movies where at the beginning you start the year with all this optimism, this hope, and then there's chaos and just like fear, and then suddenly the hero starts finding their way, and then suddenly they get it and they take action.
[00:03:04] They surge and they run to victory. And if you are not familiar with some of these movies, watch Rocky. If you have a Rocky 2 or Rocky 3 or Karate Kid, you'll see these kind of themes go over and over again as you listen to this episode. Just think about that in mind. You're going to say, "Wow, this is similar in some ways."
[00:03:19] And so for me, it was the same thing. We started this year with great optimism. Then we had the Liberation Day, we had the tariff war. We had all this like angst that unfolded, and then things started settling out, and then people started surging. So let's go through this. The big themes, as you'll see in the beginning of our report, if you'd like to learn more about it, by the way, you can request a copy on our website.
[00:03:42] The big themes are, private equity in 2025, it was a period where PE ultimately shifted from defense to offense, and we believe that happened because of a number of factors. One, the economy was robust enough and strengthened as the year progressed as a result of the economic foundations that enabled broad-based activity across both due diligence and value creation.
[00:04:06] And I think in particular, the thing that a lot of people have been looking for the last few years, we saw that the deal market tangibly started surging in recovery. So let's break down each of those.
[00:04:20] So the economy. A number of things revealed themselves last year, and it's really a tale of two halves.
[00:04:29] The first half of the year we talked about there was actually a lot of momentum heading into the economy at the very beginning, but then liberation day happened. We talked about the 12 Day War, all the consternations surrounding that, and that kind of ground things to a halt. But as the year progressed, a number of things started looking really good.
[00:04:48] And so let's talk about GDP. GDP it certainly had a negative GD print in Q1 2025. A lot of that had to do with a lot of people importing things to get ahead of the cycle and the tariffs, so there's a lot of noise in that negative print, but at the end of the day, it grew and grew. Got into the fours in the third quarter, and then right now, as of the publishing of this episode, the Atlanta Federal Reserve in their GDP-now estimate is estimating fourth quarter 2025 at a barn burning 5.3%.
[00:05:21] The other thing that we saw was a topsy-turvy year. Consumer spending was up and down, ultimately started strengthening, and it remained surprisingly resilient given all the kind of the fear in the world. Inflation, as we predicted earlier last year, remained sticky. It was coming down quite strongly at the beginning of the year, and then it started bouncing back up, and now it's actually started moderating and holding in.
[00:05:45] So the Fed did not reach its target. I don't think the Fed's going to reach its target for a while. It actually stayed within a range of sub 3%, which is overall not that bad. And this is just a reminder for everyone. The 2% target was not a target in the United States until 2012, and it came from a relatively obscure central banker in New Zealand in the 1980s who said 2% should be the target.
[00:06:09] So this is not like Federal Reserve canon that's been around forever. Traditionally it's been then that kind of 2 to 3% range that the Federal Reserve aspired for versus a pinpoint that they changed to after the great recession of 2009. And so at the end of the day, inflation is not great, but it's not bad either.
[00:06:28] The other thing that I think was really important, people are talking about when's all this productivity going to start hitting from AI. We saw a surge in AI in the third quarter, the last print that was done by the US Federal Government. We saw productivity go up to 4.9 versus 3.3 the year before. That is a massive spike in productivity, so the economy is picking up pace and it's working more efficiently.
[00:06:56] The other thing that I was really heartened by as I looked at the economic measures, is that certain segments of the economy that had been underperforming, and I would say when you break apart GDP into its segments was absolutely in a recession, was the manufacturing industry.
[00:07:14] The manufacturing industry, if you look at PMI over prior years, you'd look at its component of GDP, has been really hurting, and I think large portions of the US economy have been in recession in a way that Morgan Stanley, middle of this last year, referred to as a rolling recession. So I was glad to see that they came in and came to the same conclusions that we've been having over the last year and a half, two years.
[00:07:37] It's really a positive signal that the manufacturing industry, slowly but surely, is finding their footing. And one of the things that we look at regularly to understand how manufacturing is behaving, is the S&P manufacturing PMI. If the PMI figure is below 50%, it means it's contracting. If it's above 50%, it means it's expanding.
[00:07:58] 11 out of 12 months in 2025, the PMI was expanding for the manufacturing role. I think that is a really good signal that the parts of the world that have been in recession have come out of it and are getting into the upswing. And so as we look at 2025 from an overall economic perspective, this wasn't like an unbound irrational exuberance and enthusiasm and everyone was having parties every day.
[00:08:26] It was a nonlinear wavy sine curve at an angle gradually going up into the right, and that's what we're seeing, and it's gotten a little stronger, and then it would take a step back and it got a little stronger, a step back. But if you draw a line through it, that line's up and to the right. Now what that did was provide a foundation for the business builders of PE to say everything's going to be okay. We can get back to business.
[00:08:53] Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives that say, "Hey, I'm not private equity. Can I still use BluWave to get connected with resources?"
[00:09:08] And the short answer is yes. Even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from everyday top proactive business leaders at public companies, independent companies, family companies. So absolutely you can use this as well.
[00:09:26] If you want to use the exact same resources that are trusted and being deployed and perfectly calibrated for your business needs, give us a call, visit our website at BluWave.net. Thanks. Back to the episode.
[00:09:42] Let's talk about the next big observation that we made last year. Next we saw broad-based activity across both diligence and value creation. And what I'll say is this wasn't like smooth up and to the right, just like the economy during the year, during the first half of the year. In the middle, it was pretty topsy-turvy.
[00:09:59] It was up and down and up and down. But then we get to the fourth quarter of 2025 and we saw our volumes surge. And so our project volumes in the fourth quarter for due diligence went up 41% year over year, and our value creation measures went up even higher, 45%. So what that signals to us is the deal market is coming back because diligence is surging.
[00:10:25] And remember, people only call us in the private equity world on diligence when they're ready to spend money and they think they have a chance. And so it's a pretty good forward measure. And then when they call us and they get their diligence resources lined up, then the deal doesn't close for a couple months usually.
[00:10:42] And so this is a really good multi-month forward measure when we see 41% increases in diligence, that is a really good signal. The other thing that we saw though was it just wasn't related to diligence. It was value creation. They kept their foot on the gas as they have kept their foot on the gas over the last multiple years on value creation.
[00:11:02] And so this is something where you've got both kind of levers of impact and PE now fully taking place over the last several years, it was much more of a value creation game. We're working on our portfolio. We're trying to get them equipped. Now it's working on portfolio, but we're buying new, which is going to have a self-reinforcing cycle
[00:11:20] for those of you who serve the value creation phase of business, because new deals involve a lot of value creation. And so, where were we spending time this year? In the PE world, one of the things that they're spending a lot of time on is finance, where they often do, so we saw a 38% increase Q4 2025 over Q4 2024.
[00:11:43] And so that's not a surprise. Human capital was a really big surge in a way that was delightfully encouraging. So we had been seeing human capital slow, quarter after quarter, as the PE industry just was hiring less. Now we're mostly involved at the C-suite. We get involved the middle level too, but what this means is they're involved with, they were just doing hiring and hiring less. Now, one of the reasons for that, if you dig into it, is a year or two ago, really what they were doing is doing what we would call midstream changes, right? And so if you're in a private equity investment firm, you're generally going to do a lot at the beginning of a deal.
[00:12:22] If it goes right, you just keep on going all the way to exit and you're going to exit three or four years from now. If things don't go right, you're going to do a midstream change because PE is not going to just let the cards fall. They're going to be successful and they're going to get the right people on the bus to do so.
[00:12:36] So very often you'll have leadership changes in the middle of a hold call, year three, so that they can get things going again. That will ultimately lead to a successful exit by year five or year six. And so we saw a lot of midstream changes in 2022 when much of the world entered the recession, and their portfolio companies, in some cases, weren't reacting as the PE firms need them to in order for them to support their stakeholders that are pension firms, endowments, etc.
[00:13:03] And so one of the things that I think was very encouraging is that we saw human capital make a surge back. Our sense is a lot of this starts to relate to the fact that new deals are happening again. With new deals, they start bringing in the right people who are going to take them from A to D over a five year hold to create all this value and economic benefit for communities at large.
[00:13:27] The good thing that we saw here was a 62% increase in human capital projects from Q5 to Q4. That kind of volume surge is something that we hadn't seen a lot in human capital in quite a while. So that's another, I think very optimistic thing and we'll tell you as everyone wants to talk technology, people are still really important and they're the ones who are basically directing the technology.
[00:13:51] And so with technology in mind, where do we also see a huge amount of project volume technology? And so business intelligence, analytics and AI surged massively with the overall technology category growing 86% year over year from Q4 2005 versus Q4 2024, and so a lot of activity on both ends of the spectrum that ultimately was topsy-turvy for most of the year, but culminated in a huge surge into the end of 2025, which is going to bode really well for sentiment in 2026, which is part of the great reason why I was so happy at the beginning of this episode because I think we are entering into our next growth cycle. More on that in a second.
[00:14:36] So the only other thing that I will touch maybe one degree further on is the whole concept of due diligence. One of the things that we really look at is, is it a false surge or is it a real surge in diligence, relates to a specific product called commercial due diligence, which is in the strategy realm.
[00:14:55] That is a very expensive project. It's multiple hundreds of thousands of dollars. You only do those in private equity when you think a deal is likely to occur because the dollars are so large and once you turn it on, it's hard to turn off. And so the thing that we saw in the fourth quarter of 2025 was a 31% increase in commercial due diligence project demand from the business builders of private equity.
[00:15:20] That was a normalized number because if we looked at it kind of year over year, it was probably closer to flat in absolute project numbers. But here's the big difference. In the fourth quarter of 2024, we saw a lot of projects start, and then they pulled the plug, they went quote unquote "pencils down."
[00:15:41] And so what that told me was going into last year, there was a lot of false optimism. A lot of the companies were probably shined up and didn't withhold scrutiny, and the PE firms, as soon as they could pull the plug, so they spent as little money as possible on those projects, which are extremely expensive and a really bitter pill to swallow if you don't close a deal.
[00:16:00] We saw them cut reams of those deals going into the beginning of last quarter this year, we're not seeing them getting cut there moving forward, and so that's something that's also really encouraging, that gives us comfort that this isn't like a false thrust. It's one that's actually happening and the train is continuing to leave the station in a good way.
[00:16:21] Another thing, you look at the PitchBook data, the overall value and volume was a big story. Volume was flattish in PitchBook. Value is up, so they're doing bigger deals. One of the great quotes that I think they put out there that corroborates what we're seeing as well is they're quoted in one of their most recent publications on PE as saying, after a rocky start in early 2025, US private equity made a striking comeback, fueled by renewed market confidence, improved financing conditions, and a clearer macroeconomic outlook.
[00:16:48] So, another great reputable firm with really interesting data like us is seeing similar things that we are, and I think we have some forward measures that are going to show that optimism is going to be even better as we enter into the first quarter of 2026. So those are the big themes that are playing out.
[00:17:09] We talked about really tactically what's going on. Technology and human capital are the sub-themes that are really surging right now. There's a lot of reasons to be positive.
[00:17:20] Hi, this is Sean. Wanted to take a quick moment to tell you a little bit why BluWave exists. It's based on this whole notion that assessing opportunities and building businesses is really hard.
[00:17:32] We all know third party expert service providers can dramatically help, but at the same time, it's hard to know who's good, usually leaving you like I would do and call friends and ask, "Do you know someone who does this?" Or just go the square peg, round hole route. So after nearly 20 years in PE, I decided to solve my own problem and create BluWave.
[00:17:53] Today many hundreds of PE firms, thousands of PortCos, leading public companies, private companies, all call BluWave, to instantly get connected with the exact third party service provider that they want that's pre credentialed by BluWave and perfectly calibrated for their need and really good. You too can give us a call or visit our website at BluWave.net.
[00:18:13] We're free to use and you can benefit the same way other top PE firms do. Back to the show.
[00:18:20] With that in mind, let's turn to our 2026 predictions. So my predictions this year are as follows. One, the US economy is going to heat up and is heating up. Two, AI moves from buzzword to tactic. Three, businesses are going to bifurcate into winners and laggards.
[00:18:44] Four, software choices explode and create decision paralysis. And lastly, the private equity deal market continues its meaningful rebound.
[00:18:54] So let's go through each one of these. All the measures that we're looking at continue to show that this economic recovery is going to continue to accelerate and do well throughout the rest of the year.
[00:19:10] We believe so, not only because of the 2025 measures, but we now also have pro-growth fiscal policy in the US government. We have regulatory easing coming on in a big way that's going to meaningfully impact money supply at the banks, by the way, which is going to provide the money multipliers throughout the entire economy.
[00:19:27] We have continued robust credit availability. Don't forget this, we have an interest rate reduction cycle that has commenced and will continue to commence throughout this year. Last thing you don't want to sleep on in a year like this is you have the midterm elections. It's not atypical for many administrations on either side of the party,
[00:19:47] you want to have a good economy during midterms, so you keep your party in control, and so that's something that happens every single year. The other thing that I will really reinforce is that there is going to be some tremendous support from taxes. There's huge tax deductions and reductions that are coming out, and so there's going to be a lot of refunds coming out.
[00:20:09] One of the more important things that I think is going to be really impactful is there is an ability to get full accelerated depreciation on capital equipment purchases as related to the tax bill last year. What that means is manufacturing companies can start buying capital equipment and they don't have to depreciate it for taxes over like seven years.
[00:20:27] They can take the entire benefit in one year, which has profound tax impact benefits for any company that buys stuff. And so I think that's going to be another huge benefit that's going to because a meaningful reinvestment in the manufacturing sector now, as we think in the next year. I think for sure inflation is going to persist.
[00:20:47] Volatility will persist. Strangely enough, the world is just used to constant volatility at this point. There's an element of pain that we're all just used to now, and then for any of you who have ever had chronic pain, it goes to the background after you're just going again and again,
[00:21:01] and so now I think people are just used to it. It's just kind of like, "All right, this is life. This is what it is." And so I think if you take all of this together, the balance of risk is shifting towards growth. We are all things considered, in my mind, decidedly entering into the next economic cycle. I think this economic cycle will be more of the five to seven year variety,
[00:21:21] and sincerely hope and don't think that this will occur again, that the Federal Reserve decides that we're "Thou shalt not have another recession", and we go 15 years without one. Every economy needs to go through that kind of wind down, recharge, reload phase. You've got to take a nap and probably get a fever in between to reset the ecosystem, and I think that's going to be a normal cycle that used to happen for most of the history of time up until 2009 through 2022.
[00:21:50] And so, how do you play to win on this? I think if you are not already, you need to shift to defense from offense and you got to do so earlier than your competitors. We saw decidedly the PE firms second half of last year hitting the gas. They're seeing it and if they're seeing it and they're acting on it, so should you, I would say particularly on this, make sure you're investing ahead of demand on your sales teams.
[00:22:13] You have the people who can sell your product going into the cycle. Don't just think about sales teams, think about pricing, think about salesforce effectiveness. You want to probably expand, recruit, get the right people in the right place so you can capture this lift. The other thing that I would say is, speaking of pricing, look at your pricing strategies, not just protect your margins and pass through inflation.
[00:22:33] For some of you, it's going to be a great opportunity to grab share by actually holding price or lowering price. Demand elasticity works in multiple ways, and this could be a great time to grab share. So for all of those things, if you don't know how to do this, we have the world's best toolbox for activating these tactics and strategies, many hundreds of private equity firms use this for free for us.
[00:22:56] You can do the same whether or not you're a private equity or not. The next big prediction, we talked about AI moves from buzzword to tactics. A lot of this, what's going on over the last several years reminded me of growing up in like my early business career in the 90s when the internet came out.
[00:23:12] The thing that happened then, which this will sound familiar to everyone here now, was when the internet came out, and think about this in 1994 or 1995, essentially what happened was a company called Netscape brought the first internet browser, of scale anyways, to the world, and suddenly you didn't have to be a programmer to use the internet, and all of a sudden the internet was available to everyone.
[00:23:38] And everyone in the world said "The internet! The Internet's going to change the world. We're all going to work for the internet." You could get an MBA in the internet. You could get an undergrad degree in the internet. Investment banks had internet investment banking groups. Everyone thought the internet was a strategy.
[00:23:52] The internet was not a strategy. The internet was a tactic. It was really exceptionally and is really exceptionally good at moving information from A to B, to C to D, and democratizing flows and completely removing friction from that, which then enabled you to move goods and services at lightspeed as well.
[00:24:09] And it made the world an entirely smaller place, but it's a tactic as part of a strategy. And people who understood that, like Amazon said, "No, we're still going to be a bookseller, but we're going to use the internet to move the speed of business at lightspeed and bring a whole bastion of choice to the world that they never enjoyed before.
[00:24:30] And we're going to do it in a faster, more efficient, and effective and satisfying way than any before at the time. And so that is something, hopefully, that sounds familiar the last couple years. It's AI. "We're all going to work for the robots." AI is something and you see these startups where they'll raise a billion dollars without even a single idea.
[00:24:48] It's just people who say, "AI, I know AI." And I think that's great, but it's also a cop out. AI is a tactic. It's really good at synthesizing information, helping you make a decision on it. Maybe even taking a first step or two on action, particularly around repeatable processes and flows. And so that's why the agents are really taking off.
[00:25:11] It's something that is really good in certain parts of your organizations and should absolutely be run towards because it's going to get better and better just as it has been. That was the big shift and will be the big shift from the last couple years to this year, as people will realize it's a tactic. Many already do, but it's going to meet the broader kind of ethos.
[00:25:32] And part of, like you look at the symbols, you look at some of the things that happened last year, was all these projects that started and all of them failed. Anyone can think about all the headlines you read about that in 2025. You're going to see a lot moving forward. We're seeing those demand patterns in our project data as we speak.
[00:25:49] And so you are going to see AI activated in all sorts of places, and you better run towards it if you're not already. I have to say I'm constantly surprised by the number of portfolio companies that we interact with that are resisting this. And for any of you CEOs, C-suite leaders, aspiring leaders of businesses and business builders, this is something you need to run towards.
[00:26:16] For those of you on the internet, think back to the people who resisted the internet. It doesn't end well. And so you can either run towards the change or you can resist it and suffer. And so really what we're telling people, here's how you play to win. You need to reevaluate every function in your organization through this force multiplying lens of AI.
[00:26:37] You got to be really deliberate though. Don't just saw your talent ankles off by cutting your pipelines of future talent. One thing we're seeing everyone do is stop entry level recruiting because candidly, a lot of these tools can do what a 22-year-old can do. I would just be very careful about overdoing it because you're going to pay for it later when you haven't developed that talent that you're going to need, who can then much more meaningfully manage these AI tools at an experienced level.
[00:27:06] So when you bring them in, don't just have them do the same kind of data entry, really rote stuff, you are going to have to train them to use these tools, to think more critically, and use them as decision support tools. So you have to change how you train people to be successful in the new now.
[00:27:21] With that in mind though, a lot of companies are doing this, you can and should still use AI to collapse cycle times, eliminate manual redundant work, things that are just process oriented, where it happens again and again in a common, consistent way.
[00:27:35] Most of our PE firms are running towards that already, and many have already fully activated that. There's no reason to do it. The humans don't like doing it. The robots are really good at that. AI's really good at it. Make sure you're doing that too. The other thing I would say is focus on purposeful adoption and execution, not just endless pilots or experimentations.
[00:27:58] We used to invest in industrial companies in my private equity days, and then we would go through this process of hiring all these green belts from a Lean Six Sigma standpoint because you're like, "We're going to bring process efficiency and learn from the Toyota production system. And so we're going to get all these Lean six Sigma green belts will become black belts and then it's going to be great."
[00:28:17] But then all these green belts started doing projects everywhere. All of them were like, had an impact of like $2, like half of them failed. And then we took everyone away from their jobs and everyone did all this nonsense and none of it happened, because we tried to do too much across too many people.
[00:28:32] And so, while urgency is important and adoption and training is important, measure twice, cut once. Think about where you need to take that time, and then do fewer things better, get some wins, build support within your organization, and then do more, but realize you're going to have only so much that you can get done at once.
[00:28:51] Spend the time right now to prioritize where this is going to be most impactful and do it right, and then go into the next one and the next one without exhausting whatever free capacity you have in your organization for special projects.
[00:29:03] The other thing that we talked about is supporting organizational change management. This is still something that I think we've heard about it and I mentioned earlier people are resisting this and they're resisting AI, particularly in the US in ways that's really, I think, jeopardizing to the future of organizations. If you look at China and you ask people about how positive AI will be in their society, it's 80% plus. If you look at the US, it's a fraction of that. And so we're in a global competitive environment. We're also in a highly competitive US environment. You've got to explain these tools to your teams. You have to show them the wins, and you have to empower them to use them well. And so you have to be a chief repeater within your organizations around these AI tools and say like, "This is something that's going to turn you into a superhero, not a zero." If you resist the change, you're going to have a hard time keeping up.
[00:30:01] The book I speak ad nauseum on this podcast and others is Who Moved My Cheese. It's just a great parable about embracing change. It makes it so clear and so easy. If you haven't read it, one click on Amazon, listen to it on whatever platform of choice, you could probably go ahead and get a really good summary using ChatGPT, but figure this out because this is THE challenge of our day, which is really THE opportunity of our day if you run towards it.
[00:30:27] Next prediction, just a play on what we just talked about. Businesses are going to bifurcate into winners and laggards. Those who are running towards AI are going to be differentially successful than those who do not. Those who resist it will willow and ultimately fall further and further behind their peers.
[00:30:47] And this is also something where I think it'll be very interesting, and this is similar to the 90s and the internet. You're going to be able to see a lot of peer organizations and certainly even some leaders that are going to fall behind their competitors, and you're going to see distances between competitors based in large part on who runs towards these AI tools and who does not.
[00:31:08] So, once again, run towards this change. You need to move faster than your competitors in adopting them tactically and thoughtfully. You want to invest significant efforts in change management. Double tapping on that, you need to treat speed, agility, and adaptability as a core strategic asset. Now, I totally get that AI is a daunting concept for everyone, including me.
[00:31:36] There are all sorts of groups who can help you do these things well, and there's also all sorts of resources free on the internet. And so if you need some help, give us a call. We can give you the resources for free to do this. We get many calls every day for that need. The short course, I'd say on our own journey, learning from this is the first thing you need to do or maybe the first two things you need to do is A) get your data organized.
[00:31:59] This is the unsexy part of AI. If you don't have your data organized, structured, clean, and you don't invest in keeping it that way, because it will lose calibration. Anytime there's a system with rotation and force, things lose calibration. So you have to invest in keeping it clean. You really can't get the most out of any of these tools and it'll be garbage in, garbage out.
[00:32:19] So someone on your organization has to be assigned to do that and to keep it in place. It's just like maintaining a piece of equipment. The other thing is everyone in your organization should have access to a large language model. I would highly encourage you to use a large language model that has protective measures in place so that you don't democratize the confidential information in your organization.
[00:32:39] Everyone should have that in place. We give two model choices to each group. They can each pick one or the other, and so we actually find certain models are better than others. Claude is, for instance, is better at technology and coding, and then we find that ChatGPT is probably, at least right now, the best all purpose tool for most.
[00:32:58] And so make those tools available to people. And if you want some help to go to the next leg, you should be visualizing the data. You don't need to build your own neural networks. A lot of this, as we talk about in a second, we'll be going into software and it'll be easier and easier to use, but just run towards this opportunity. I can't stress that enough.
[00:33:19] Let's talk about the next one. Speaking of AI, one of the big things that's happening is the, you're going to see, and you probably already have started to see, an explosion of choice coming to the market with software tools that are not only traditional kind of enterprise-y feeling software, but they're embedded with AI that make them super powerful.
[00:33:42] And it's really the upstarts that are candidly making better use of this. We can also all think of the large legacy tools that are trying to haphazardly throw AI into it, and you get zero usage of them. The world is going to be saturated with software. And why is that? One of the very best use cases for AI today is coding software in the hands of an experienced software engineer.
[00:34:09] They can now do things in days and maybe low digit weeks that took many digit months, if not years, to do. At the bare minimum, we're seeing 30% increases in productivity, and that's only accelerating. Now, I'll reinforce that's usually at the hands of an experienced software developer. I think you still need to know what you're doing, but that gap and that requirement is getting less and less every day.
[00:34:34] So as a result of these tools, they're able to stand up ideas and software. There's this concept of disposable software, and so as an example, even me, I have zero software capabilities. I don't know any programming language. The last time I did programming was with Basic, in eighth grade for a computer science project where I did a little decider and it wasn't that great.
[00:34:56] But I'm making apps on weekends because it's just, "Oh, I wish I had this", and I'll just tell an LLM based software development system to make an app for me, and I put it on my phone. And so these things are coming.
[00:35:06] Now, here's what's going to happen. A result of that, you are going to be overwhelmed by choice. You're going to have BDRs knocking on every single door, the front door, the back door, the last door, your email, you're going to get mailers. Because they're going to apply the enterprise software strategies and you are going to be saturated with all sorts of choice. And so one thing that I think you really need to do, and I'll reinforce a lot of these themes here, start with your strategy and tie not only your AI strategy, but also your software strategy to these core strategic objectives that are going to enable the success of these strategies.
[00:35:46] So be really thoughtful about what you need and where. Spend time upfront to scope what you need, create scorecards, say "Here's what we want." Take time upfront to select the right tools, not just everyone that comes through you. For new software vendors for our company, it has to be an extraordinary product for us to even consider entering into anything more than a single year contract.
[00:36:12] So I would recommend everyone here don't enter into anything more than that. The world is changing so fast. And as an example of that, last year we brought in a new software product in our office of the CFO. It was great. Then a new one came out that was even better. And thank goodness we had a short term contract because we tore out that first software and put in the new one before the year was even done because the other one was so much better.
[00:36:37] And so if you're on a three year contract, you're basically going to be holding to their roadmap to nowhere if they're not keeping up. And so just be really thoughtful about an organization as it relates to your software strategy. The other thing that you can and should do, if you're a customer of BluWave, I would highly encourage you to call your BluWave account executive, receive a free read on what's going on.
[00:36:58] We are equipping thousands of projects and technology that relate to software, and so we have a really unique behind the curtain view as to what's being used. I would highly encourage you if you have a BluWave account manager to contact them, speak with them, and they can give you some alpha in this category for you, both the private equity firms and their portfolio companies.
[00:37:21] Okay, the last prediction, private equity deal market continues its rebound. Private equity momentum is going and going. We continue to see this in our data with a strong economy in place with high pressure from LPs demanding liquidity, which is at a fever pitch. For those who know, you can Google or ChatGPT.
[00:37:41] Add the acronym DPI. Everyone says "DPI, DPI, DPI." In PE-land, inventory within private equity is still very high, and dry powder within PE exceeds $1 trillion dollars. All of this combined, meaning the portfolio companies have had time to recover. The LPs are demanding the PE inventory, they have a lot on the shelf.
[00:38:02] There's strong capital markets. There's a growing economy, which gives a vantage and a comfort into the future to sell into. There's all sorts of measures that are really good, and as a result, you're going to see a lot of this inventory come to market in a big way. Not only because it can and should, but because it has to.
[00:38:23] And so, if you're in the PE world, be ready for it. Make sure your teams are agile. Make sure you're going to have capacity to process all of these opportunities. How do you play to win? If you're a PE firm, use these AI tools. There are certain ones you have to be careful. They need to be SEC compliant. There are certain ones that you want to make sure you have tools that are going to give you track and traceability and things that are going to keep you in good stead.
[00:38:48] Call us, we know what those tools are. You want to use these tools to give you, not only insights that equip a more competitive valuation, but use speed and certainty as a competitive advantage. And so my strong hypothesis is every PE firm that I'm friends with will over a beer tell me like, "Gosh, the values are still so high."
[00:39:09] And I totally get that and feel that, and is an individual investor in individual deals, I see that too. And you have to gulp. And then as a former 20-year PE person, I thought that multiples were high then too, and it just gets higher. Every deal has a few components. It's valuation, speed, certainty in terms. No one wants to solely compete on valuation.
[00:39:29] That's the easiest way to win a deal. Some of these tools are going to allow you to massively put coefficients on the other ones. We're going to move very quickly. We're going to move with a certainty of close, and we're going to give you some better terms that, on the legal side of the equation, not the value side of the equation, that help make you feel more certain as well.
[00:39:49] If you do that, just like every other peak deal cycle or hot deal market that we'll be entering into, you're going to get an advantage. A lot of these AI tools are going to help equip that. The other thing that I would say is, we see this when the market really starts breaking loose, and we've seen it over cycle, over cycle, over cycle, is that you're going to start having capacity constraints within your specialized service providers.
[00:40:11] A lot of the service providers have pulled back on their staffing because the deal market has been so mediocre for so long. And so you're going to really have some challenges if you're not careful. And so one way you can resolve that is give us a call. We've never not filled someone in any of the cycles.
[00:40:28] If even your go-tos aren't available, give us a buzz. The other thing that I'll say is the huge opportunity as I kind of channel all the gray hair and seeing this movie before, is that there is going to be an opportunity to stick around the hoop. I think the A's and the B pluses are going to get all the attention as they usually do.
[00:40:47] Then what happens is people don't have time for the B minuses, C pluses that have a little scuff on them. Inevitably, those deals come out, they stall and they go nowhere. And very often they're pulled. And so for those of you who look for areas where you can tangibly create value for businesses that aren't perfect, and I'm not saying turnaround businesses even just like they're not all boxes checked, I think there's going to be a huge opportunity.
[00:41:11] Stay close to your investment bankers. Make sure you come back to them. If you do, go pencils down and make sure you're in. Say we're very interested so that inevitably when these deals come back, you're ready to go and you can probably get a great value opportunity in this market. That was the story of my life across multiple cycles where I just never followed up with the company.
[00:41:31] And then you see the deal trades, and then you talk to the investment banker and they kind of wink, wink, nod, nod, tell you what it went for, and then you go, "Oh, we would've paid that amount, but we didn't stick around the hoop." So lesson learned.
[00:41:44] So I think a lot of really exciting stuff is coming up in 2026. Hopefully after listening to this first part of this episode, you can see why I'm so super excited.
[00:41:55] Let's wrap up and talk about how we did with our predictions in 2025. I'll try to go through these relatively briefly. I think net-net we did pretty well, and so the predictions we made at the end of 2024 for 2025 were as follows.
[00:42:13] We predicted the M&A market was going to rebound. We predicted a manufacturing renaissance. We predicted a flattening of organizations. We predicted that inflation will be sticky, and then we predicted that the next economic cycle is underway. So hopefully by the first half of this episode and with humility, you'll hear us say, "Oh, we did pretty well."
[00:42:32] And some of these seem obvious now, but in '24, I think a lot of people were calling for recession. And so we said that the M&A market was going to rebound. I think we did well there. It came back, it came late, but ultimately it happened. And so I think that one was right.
[00:42:45] Manufacturing renaissance, I think that's the one that we were too early on and missed. It started happening, but not quite yet. And so we look at 11, 12 months of PMI growing. You look at growing NAM manufacturer outlook, serving confidence, growing. Capital equipment starting to take up. You see a lot of measures within manufacturing starting to shine. We haven't seen the big investments in capital footprint in new facilities yet. We have not seen the repatriation of foreign facilities back into the US.
[00:43:22] I think part of that's going to be tied to demand and further down the cycle in the economic recovery. I think we will also see a lot of that tied with the tax incentives related to capital equipment purchases. If there is any time to build a plant in the United States, it's within the term of this "Big Beautiful Tax Bill", quote unquote not my words,
[00:43:44] that allows these amazing incentives to put it in, equip a plant, and so I think it will continue to do so, and I think it will do so not just because of incentives, because it's strategic for the United States, and we're going to continue to make it difficult to make everything including key strategic items outside of the United States. There are things that we need to be able to have as we have global rivals.
[00:44:06] Now, next thing we predicted flatter organizations. We said that AI is really going to lead to a flattening of the world. We thought there was going to be fewer middle level managers and a reduction of entry level positions. I think we got that mostly right so far.
[00:44:23] Where we're really seeing it happen right now is the reduction in the entry level positions. As I mentioned earlier, I think companies need to be careful about that. You don't want to totally just cut off your talent supply because ultimately you're going to be lacking in your middle. But we are also seeing the middle being able to use these tools.
[00:44:41] There's a certain level of sophistication experience that turns a human into a superhuman with the power of an AI tool given to them. And that's hard to replicate versus saying, just coming right out of college, "I'm going to be able to do things." And so I think where we got it right was that the entry level is definitely thinning that has a whole host of cashflow positive implications in the short term for businesses.
[00:45:04] It has a whole host of other issues that we have to be mindful of for the longer term. As you think about kids that are leaving college or are in college right now, I can't stress this enough: make sure that you are expert in these AI tools by the time you get to your internships and your interviews, because you are now expected to act not like a 22-year-old like I was.
[00:45:27] I was probably expected to act like an 18-year-old. 90s were different. But you're going to have to act like a 25-year-old and so know how to use these tools, invest in yourself so that by the time you come and they say, what can you do, you're teaching the old gray hairs how to do this stuff, and suddenly you're going to be the most sought after person in the organization.
[00:45:45] So one of the just unsolicited pieces of advice: if you have kids or you are a college student, make sure you're expert in them and then you know how to use them and study up and get smart just like you are across a whole host of topics during your academic career.
[00:46:00] Next thing we predicted was inflation will be sticky. I think it was quite sticky. It went down and then up and then moderated down. I think it's going to stay in the mid to high 2s for a while, if not for a long time, it's just going to be hard to do everything at once. You can't cut taxes, you can't have tariffs, you can't provide all the stimulus and then keep inflation at 2%, it's just the math doesn't work. And so at this point, with the deficits that we have and the amount of things we have to do in the US economy to set ourselves up for longer term success, something has to give. And I think we're just going to have to deal with higher inflation for longer.
[00:46:37] Last prediction we made for 2025 was the next economic cycle is underway. I think we got that one right. Once again, it was late, it happened later in the year. It wasn't obvious that we were going to get this right for much of the first half of last year, but ultimately the quarter closed, GDP's accelerating, the job market remains within full employment. 4.5%, ultimately is the definition, even 5% sometimes we're at the upper ground to full employment.
[00:47:00] It's not great in health right now, for sure. But it's still within that range. Productivity is gaining, consumers are surprising and resilient. And then you've got other recessionary segments coming out, like in manufacturing and coming up beyond to keep this recovery and economic gain underway. You've got all sorts of stimulus that we just talked about previously.
[00:47:22] So net-net, I think we did pretty well on our predictions. And the only reason we're able to do that is we get to see what a statistically significant percentage of the best business builders in the world do every single day. And then we can look at those patterns and it sounds insane to a certain degree when I hear me say this, but it allows us to see the future.
[00:47:46] So hopefully all of this information gives you a little bit more information, alpha, and edge to be more successful in the days ahead. If you would like to see anything more behind this conversation, you can go to our website or speak with your account manager if you have one and are a customer of BluWave, and they can give you the report that'll share a whole lot more than what we talked about here today.
[00:48:14] You can also call us and talk. We share what we see every day with all of our customers, and we're free to use for most of what we do. So I hope this once again is helpful. Good luck to an amazing 2026.
[00:48:39] That's all we have for today. If you'd like to learn more about the Private Equity Insights report, please see the episode notes for links. Please continue to look for the Karma School of Business Podcast anywhere you find your favorite podcast. We truly appreciate your support. If you like what you hear, please follow five star rate, review and share, it's a free way to support the show and it really helps us when you do this, so thank you in advance. In the meantime, if you want to be connected with the world's best in class private equity grade professional service providers, independent consultants, interim executives, that are deployed and trusted by the best business builders in the world, including many hundreds of top PE firms and thousands of their portfolio companies, and you can do the same whether or not you're in the PE world, give us a call, or visit our website at BluWave.net., and we'll support your success. Onward.
[00:49:25] The views and opinions expressed in this program are those of the individuals presenting, and do not necessarily reflect the views or positions of any other persons or entities, including those referenced herein. No representations, warranties, financial, legal, tax, or other advice are made herein. Consult your advisors regarding any topics discussed during this episode.
[00:00:25] Enjoy.
[00:00:36] All right, everyone, buckle up. We have an exciting 2026 ahead of us. Today we have a special episode where I'm going to talk a little bit about why I'm so excited about this year, and it largely started last year. Today we're going to cover the latest BluWave fourth quarter 2025 Private Equity Insights report.
[00:00:58] The report covers a lot of things that I think our listeners are going to find interesting. One, we're going to talk about the major themes that unfolded in 2025 amongst the best business builders in the world, the private equity investors who are as proactive and resilient and tenacious and forward-looking as you get with a high degree of expected value in their outcomes.
[00:01:20] And so when we look at what PE does, it's generally a good consensus read on what the rest of the economy will do and should do earlier than later. We're going to talk about how the themes in 2025 are going to roll forward and have a big impact on 2026. So we're going to make our annual 2026 projections. Then we're going to go back in time and dare to look at how we predicted the world would happen in 2025.
[00:01:44] And spoiler alert, with humility, we crushed it. And part of that is because we have this, all this amazing data from the best business builders in the world, which helps us see the future. So this is going to be a really good one. I'm excited to jump right in. So let's talk about what the big themes were in 2025.
[00:02:02] And I was reflecting on the data that we've locked in. The report that we've written, it made me think as I think people know who know me and listen to Karma School of Business, I grew up in Texas. I only know how to think metaphorically. It's a strength but also a weakness. I can't have like straight conversations with people without using the word 'like' and 'as' and some people get annoyed, but anyways, it is what it is.
[00:02:24] I am who I am at this point. And so as I was thinking about last year, it started making me think about all these eighties and nineties movies I used to watch, like Rocky and Karate Kid. And you name these kind of like protagonists that have to overcome adversity and then ultimately succeed. I think about last year it unfolded like a lot of these movies where at the beginning you start the year with all this optimism, this hope, and then there's chaos and just like fear, and then suddenly the hero starts finding their way, and then suddenly they get it and they take action.
[00:03:04] They surge and they run to victory. And if you are not familiar with some of these movies, watch Rocky. If you have a Rocky 2 or Rocky 3 or Karate Kid, you'll see these kind of themes go over and over again as you listen to this episode. Just think about that in mind. You're going to say, "Wow, this is similar in some ways."
[00:03:19] And so for me, it was the same thing. We started this year with great optimism. Then we had the Liberation Day, we had the tariff war. We had all this like angst that unfolded, and then things started settling out, and then people started surging. So let's go through this. The big themes, as you'll see in the beginning of our report, if you'd like to learn more about it, by the way, you can request a copy on our website.
[00:03:42] The big themes are, private equity in 2025, it was a period where PE ultimately shifted from defense to offense, and we believe that happened because of a number of factors. One, the economy was robust enough and strengthened as the year progressed as a result of the economic foundations that enabled broad-based activity across both due diligence and value creation.
[00:04:06] And I think in particular, the thing that a lot of people have been looking for the last few years, we saw that the deal market tangibly started surging in recovery. So let's break down each of those.
[00:04:20] So the economy. A number of things revealed themselves last year, and it's really a tale of two halves.
[00:04:29] The first half of the year we talked about there was actually a lot of momentum heading into the economy at the very beginning, but then liberation day happened. We talked about the 12 Day War, all the consternations surrounding that, and that kind of ground things to a halt. But as the year progressed, a number of things started looking really good.
[00:04:48] And so let's talk about GDP. GDP it certainly had a negative GD print in Q1 2025. A lot of that had to do with a lot of people importing things to get ahead of the cycle and the tariffs, so there's a lot of noise in that negative print, but at the end of the day, it grew and grew. Got into the fours in the third quarter, and then right now, as of the publishing of this episode, the Atlanta Federal Reserve in their GDP-now estimate is estimating fourth quarter 2025 at a barn burning 5.3%.
[00:05:21] The other thing that we saw was a topsy-turvy year. Consumer spending was up and down, ultimately started strengthening, and it remained surprisingly resilient given all the kind of the fear in the world. Inflation, as we predicted earlier last year, remained sticky. It was coming down quite strongly at the beginning of the year, and then it started bouncing back up, and now it's actually started moderating and holding in.
[00:05:45] So the Fed did not reach its target. I don't think the Fed's going to reach its target for a while. It actually stayed within a range of sub 3%, which is overall not that bad. And this is just a reminder for everyone. The 2% target was not a target in the United States until 2012, and it came from a relatively obscure central banker in New Zealand in the 1980s who said 2% should be the target.
[00:06:09] So this is not like Federal Reserve canon that's been around forever. Traditionally it's been then that kind of 2 to 3% range that the Federal Reserve aspired for versus a pinpoint that they changed to after the great recession of 2009. And so at the end of the day, inflation is not great, but it's not bad either.
[00:06:28] The other thing that I think was really important, people are talking about when's all this productivity going to start hitting from AI. We saw a surge in AI in the third quarter, the last print that was done by the US Federal Government. We saw productivity go up to 4.9 versus 3.3 the year before. That is a massive spike in productivity, so the economy is picking up pace and it's working more efficiently.
[00:06:56] The other thing that I was really heartened by as I looked at the economic measures, is that certain segments of the economy that had been underperforming, and I would say when you break apart GDP into its segments was absolutely in a recession, was the manufacturing industry.
[00:07:14] The manufacturing industry, if you look at PMI over prior years, you'd look at its component of GDP, has been really hurting, and I think large portions of the US economy have been in recession in a way that Morgan Stanley, middle of this last year, referred to as a rolling recession. So I was glad to see that they came in and came to the same conclusions that we've been having over the last year and a half, two years.
[00:07:37] It's really a positive signal that the manufacturing industry, slowly but surely, is finding their footing. And one of the things that we look at regularly to understand how manufacturing is behaving, is the S&P manufacturing PMI. If the PMI figure is below 50%, it means it's contracting. If it's above 50%, it means it's expanding.
[00:07:58] 11 out of 12 months in 2025, the PMI was expanding for the manufacturing role. I think that is a really good signal that the parts of the world that have been in recession have come out of it and are getting into the upswing. And so as we look at 2025 from an overall economic perspective, this wasn't like an unbound irrational exuberance and enthusiasm and everyone was having parties every day.
[00:08:26] It was a nonlinear wavy sine curve at an angle gradually going up into the right, and that's what we're seeing, and it's gotten a little stronger, and then it would take a step back and it got a little stronger, a step back. But if you draw a line through it, that line's up and to the right. Now what that did was provide a foundation for the business builders of PE to say everything's going to be okay. We can get back to business.
[00:08:53] Hey, as a quick interlude, this is Sean here. Wanted to address one quick question that we regularly get. We often get people who show up at our website, call our account executives that say, "Hey, I'm not private equity. Can I still use BluWave to get connected with resources?"
[00:09:08] And the short answer is yes. Even though we're mostly and largely used by hundreds of private equity firms, thousands of their portfolio company leaders, every day we get calls from everyday top proactive business leaders at public companies, independent companies, family companies. So absolutely you can use this as well.
[00:09:26] If you want to use the exact same resources that are trusted and being deployed and perfectly calibrated for your business needs, give us a call, visit our website at BluWave.net. Thanks. Back to the episode.
[00:09:42] Let's talk about the next big observation that we made last year. Next we saw broad-based activity across both diligence and value creation. And what I'll say is this wasn't like smooth up and to the right, just like the economy during the year, during the first half of the year. In the middle, it was pretty topsy-turvy.
[00:09:59] It was up and down and up and down. But then we get to the fourth quarter of 2025 and we saw our volumes surge. And so our project volumes in the fourth quarter for due diligence went up 41% year over year, and our value creation measures went up even higher, 45%. So what that signals to us is the deal market is coming back because diligence is surging.
[00:10:25] And remember, people only call us in the private equity world on diligence when they're ready to spend money and they think they have a chance. And so it's a pretty good forward measure. And then when they call us and they get their diligence resources lined up, then the deal doesn't close for a couple months usually.
[00:10:42] And so this is a really good multi-month forward measure when we see 41% increases in diligence, that is a really good signal. The other thing that we saw though was it just wasn't related to diligence. It was value creation. They kept their foot on the gas as they have kept their foot on the gas over the last multiple years on value creation.
[00:11:02] And so this is something where you've got both kind of levers of impact and PE now fully taking place over the last several years, it was much more of a value creation game. We're working on our portfolio. We're trying to get them equipped. Now it's working on portfolio, but we're buying new, which is going to have a self-reinforcing cycle
[00:11:20] for those of you who serve the value creation phase of business, because new deals involve a lot of value creation. And so, where were we spending time this year? In the PE world, one of the things that they're spending a lot of time on is finance, where they often do, so we saw a 38% increase Q4 2025 over Q4 2024.
[00:11:43] And so that's not a surprise. Human capital was a really big surge in a way that was delightfully encouraging. So we had been seeing human capital slow, quarter after quarter, as the PE industry just was hiring less. Now we're mostly involved at the C-suite. We get involved the middle level too, but what this means is they're involved with, they were just doing hiring and hiring less. Now, one of the reasons for that, if you dig into it, is a year or two ago, really what they were doing is doing what we would call midstream changes, right? And so if you're in a private equity investment firm, you're generally going to do a lot at the beginning of a deal.
[00:12:22] If it goes right, you just keep on going all the way to exit and you're going to exit three or four years from now. If things don't go right, you're going to do a midstream change because PE is not going to just let the cards fall. They're going to be successful and they're going to get the right people on the bus to do so.
[00:12:36] So very often you'll have leadership changes in the middle of a hold call, year three, so that they can get things going again. That will ultimately lead to a successful exit by year five or year six. And so we saw a lot of midstream changes in 2022 when much of the world entered the recession, and their portfolio companies, in some cases, weren't reacting as the PE firms need them to in order for them to support their stakeholders that are pension firms, endowments, etc.
[00:13:03] And so one of the things that I think was very encouraging is that we saw human capital make a surge back. Our sense is a lot of this starts to relate to the fact that new deals are happening again. With new deals, they start bringing in the right people who are going to take them from A to D over a five year hold to create all this value and economic benefit for communities at large.
[00:13:27] The good thing that we saw here was a 62% increase in human capital projects from Q5 to Q4. That kind of volume surge is something that we hadn't seen a lot in human capital in quite a while. So that's another, I think very optimistic thing and we'll tell you as everyone wants to talk technology, people are still really important and they're the ones who are basically directing the technology.
[00:13:51] And so with technology in mind, where do we also see a huge amount of project volume technology? And so business intelligence, analytics and AI surged massively with the overall technology category growing 86% year over year from Q4 2005 versus Q4 2024, and so a lot of activity on both ends of the spectrum that ultimately was topsy-turvy for most of the year, but culminated in a huge surge into the end of 2025, which is going to bode really well for sentiment in 2026, which is part of the great reason why I was so happy at the beginning of this episode because I think we are entering into our next growth cycle. More on that in a second.
[00:14:36] So the only other thing that I will touch maybe one degree further on is the whole concept of due diligence. One of the things that we really look at is, is it a false surge or is it a real surge in diligence, relates to a specific product called commercial due diligence, which is in the strategy realm.
[00:14:55] That is a very expensive project. It's multiple hundreds of thousands of dollars. You only do those in private equity when you think a deal is likely to occur because the dollars are so large and once you turn it on, it's hard to turn off. And so the thing that we saw in the fourth quarter of 2025 was a 31% increase in commercial due diligence project demand from the business builders of private equity.
[00:15:20] That was a normalized number because if we looked at it kind of year over year, it was probably closer to flat in absolute project numbers. But here's the big difference. In the fourth quarter of 2024, we saw a lot of projects start, and then they pulled the plug, they went quote unquote "pencils down."
[00:15:41] And so what that told me was going into last year, there was a lot of false optimism. A lot of the companies were probably shined up and didn't withhold scrutiny, and the PE firms, as soon as they could pull the plug, so they spent as little money as possible on those projects, which are extremely expensive and a really bitter pill to swallow if you don't close a deal.
[00:16:00] We saw them cut reams of those deals going into the beginning of last quarter this year, we're not seeing them getting cut there moving forward, and so that's something that's also really encouraging, that gives us comfort that this isn't like a false thrust. It's one that's actually happening and the train is continuing to leave the station in a good way.
[00:16:21] Another thing, you look at the PitchBook data, the overall value and volume was a big story. Volume was flattish in PitchBook. Value is up, so they're doing bigger deals. One of the great quotes that I think they put out there that corroborates what we're seeing as well is they're quoted in one of their most recent publications on PE as saying, after a rocky start in early 2025, US private equity made a striking comeback, fueled by renewed market confidence, improved financing conditions, and a clearer macroeconomic outlook.
[00:16:48] So, another great reputable firm with really interesting data like us is seeing similar things that we are, and I think we have some forward measures that are going to show that optimism is going to be even better as we enter into the first quarter of 2026. So those are the big themes that are playing out.
[00:17:09] We talked about really tactically what's going on. Technology and human capital are the sub-themes that are really surging right now. There's a lot of reasons to be positive.
[00:17:20] Hi, this is Sean. Wanted to take a quick moment to tell you a little bit why BluWave exists. It's based on this whole notion that assessing opportunities and building businesses is really hard.
[00:17:32] We all know third party expert service providers can dramatically help, but at the same time, it's hard to know who's good, usually leaving you like I would do and call friends and ask, "Do you know someone who does this?" Or just go the square peg, round hole route. So after nearly 20 years in PE, I decided to solve my own problem and create BluWave.
[00:17:53] Today many hundreds of PE firms, thousands of PortCos, leading public companies, private companies, all call BluWave, to instantly get connected with the exact third party service provider that they want that's pre credentialed by BluWave and perfectly calibrated for their need and really good. You too can give us a call or visit our website at BluWave.net.
[00:18:13] We're free to use and you can benefit the same way other top PE firms do. Back to the show.
[00:18:20] With that in mind, let's turn to our 2026 predictions. So my predictions this year are as follows. One, the US economy is going to heat up and is heating up. Two, AI moves from buzzword to tactic. Three, businesses are going to bifurcate into winners and laggards.
[00:18:44] Four, software choices explode and create decision paralysis. And lastly, the private equity deal market continues its meaningful rebound.
[00:18:54] So let's go through each one of these. All the measures that we're looking at continue to show that this economic recovery is going to continue to accelerate and do well throughout the rest of the year.
[00:19:10] We believe so, not only because of the 2025 measures, but we now also have pro-growth fiscal policy in the US government. We have regulatory easing coming on in a big way that's going to meaningfully impact money supply at the banks, by the way, which is going to provide the money multipliers throughout the entire economy.
[00:19:27] We have continued robust credit availability. Don't forget this, we have an interest rate reduction cycle that has commenced and will continue to commence throughout this year. Last thing you don't want to sleep on in a year like this is you have the midterm elections. It's not atypical for many administrations on either side of the party,
[00:19:47] you want to have a good economy during midterms, so you keep your party in control, and so that's something that happens every single year. The other thing that I will really reinforce is that there is going to be some tremendous support from taxes. There's huge tax deductions and reductions that are coming out, and so there's going to be a lot of refunds coming out.
[00:20:09] One of the more important things that I think is going to be really impactful is there is an ability to get full accelerated depreciation on capital equipment purchases as related to the tax bill last year. What that means is manufacturing companies can start buying capital equipment and they don't have to depreciate it for taxes over like seven years.
[00:20:27] They can take the entire benefit in one year, which has profound tax impact benefits for any company that buys stuff. And so I think that's going to be another huge benefit that's going to because a meaningful reinvestment in the manufacturing sector now, as we think in the next year. I think for sure inflation is going to persist.
[00:20:47] Volatility will persist. Strangely enough, the world is just used to constant volatility at this point. There's an element of pain that we're all just used to now, and then for any of you who have ever had chronic pain, it goes to the background after you're just going again and again,
[00:21:01] and so now I think people are just used to it. It's just kind of like, "All right, this is life. This is what it is." And so I think if you take all of this together, the balance of risk is shifting towards growth. We are all things considered, in my mind, decidedly entering into the next economic cycle. I think this economic cycle will be more of the five to seven year variety,
[00:21:21] and sincerely hope and don't think that this will occur again, that the Federal Reserve decides that we're "Thou shalt not have another recession", and we go 15 years without one. Every economy needs to go through that kind of wind down, recharge, reload phase. You've got to take a nap and probably get a fever in between to reset the ecosystem, and I think that's going to be a normal cycle that used to happen for most of the history of time up until 2009 through 2022.
[00:21:50] And so, how do you play to win on this? I think if you are not already, you need to shift to defense from offense and you got to do so earlier than your competitors. We saw decidedly the PE firms second half of last year hitting the gas. They're seeing it and if they're seeing it and they're acting on it, so should you, I would say particularly on this, make sure you're investing ahead of demand on your sales teams.
[00:22:13] You have the people who can sell your product going into the cycle. Don't just think about sales teams, think about pricing, think about salesforce effectiveness. You want to probably expand, recruit, get the right people in the right place so you can capture this lift. The other thing that I would say is, speaking of pricing, look at your pricing strategies, not just protect your margins and pass through inflation.
[00:22:33] For some of you, it's going to be a great opportunity to grab share by actually holding price or lowering price. Demand elasticity works in multiple ways, and this could be a great time to grab share. So for all of those things, if you don't know how to do this, we have the world's best toolbox for activating these tactics and strategies, many hundreds of private equity firms use this for free for us.
[00:22:56] You can do the same whether or not you're a private equity or not. The next big prediction, we talked about AI moves from buzzword to tactics. A lot of this, what's going on over the last several years reminded me of growing up in like my early business career in the 90s when the internet came out.
[00:23:12] The thing that happened then, which this will sound familiar to everyone here now, was when the internet came out, and think about this in 1994 or 1995, essentially what happened was a company called Netscape brought the first internet browser, of scale anyways, to the world, and suddenly you didn't have to be a programmer to use the internet, and all of a sudden the internet was available to everyone.
[00:23:38] And everyone in the world said "The internet! The Internet's going to change the world. We're all going to work for the internet." You could get an MBA in the internet. You could get an undergrad degree in the internet. Investment banks had internet investment banking groups. Everyone thought the internet was a strategy.
[00:23:52] The internet was not a strategy. The internet was a tactic. It was really exceptionally and is really exceptionally good at moving information from A to B, to C to D, and democratizing flows and completely removing friction from that, which then enabled you to move goods and services at lightspeed as well.
[00:24:09] And it made the world an entirely smaller place, but it's a tactic as part of a strategy. And people who understood that, like Amazon said, "No, we're still going to be a bookseller, but we're going to use the internet to move the speed of business at lightspeed and bring a whole bastion of choice to the world that they never enjoyed before.
[00:24:30] And we're going to do it in a faster, more efficient, and effective and satisfying way than any before at the time. And so that is something, hopefully, that sounds familiar the last couple years. It's AI. "We're all going to work for the robots." AI is something and you see these startups where they'll raise a billion dollars without even a single idea.
[00:24:48] It's just people who say, "AI, I know AI." And I think that's great, but it's also a cop out. AI is a tactic. It's really good at synthesizing information, helping you make a decision on it. Maybe even taking a first step or two on action, particularly around repeatable processes and flows. And so that's why the agents are really taking off.
[00:25:11] It's something that is really good in certain parts of your organizations and should absolutely be run towards because it's going to get better and better just as it has been. That was the big shift and will be the big shift from the last couple years to this year, as people will realize it's a tactic. Many already do, but it's going to meet the broader kind of ethos.
[00:25:32] And part of, like you look at the symbols, you look at some of the things that happened last year, was all these projects that started and all of them failed. Anyone can think about all the headlines you read about that in 2025. You're going to see a lot moving forward. We're seeing those demand patterns in our project data as we speak.
[00:25:49] And so you are going to see AI activated in all sorts of places, and you better run towards it if you're not already. I have to say I'm constantly surprised by the number of portfolio companies that we interact with that are resisting this. And for any of you CEOs, C-suite leaders, aspiring leaders of businesses and business builders, this is something you need to run towards.
[00:26:16] For those of you on the internet, think back to the people who resisted the internet. It doesn't end well. And so you can either run towards the change or you can resist it and suffer. And so really what we're telling people, here's how you play to win. You need to reevaluate every function in your organization through this force multiplying lens of AI.
[00:26:37] You got to be really deliberate though. Don't just saw your talent ankles off by cutting your pipelines of future talent. One thing we're seeing everyone do is stop entry level recruiting because candidly, a lot of these tools can do what a 22-year-old can do. I would just be very careful about overdoing it because you're going to pay for it later when you haven't developed that talent that you're going to need, who can then much more meaningfully manage these AI tools at an experienced level.
[00:27:06] So when you bring them in, don't just have them do the same kind of data entry, really rote stuff, you are going to have to train them to use these tools, to think more critically, and use them as decision support tools. So you have to change how you train people to be successful in the new now.
[00:27:21] With that in mind though, a lot of companies are doing this, you can and should still use AI to collapse cycle times, eliminate manual redundant work, things that are just process oriented, where it happens again and again in a common, consistent way.
[00:27:35] Most of our PE firms are running towards that already, and many have already fully activated that. There's no reason to do it. The humans don't like doing it. The robots are really good at that. AI's really good at it. Make sure you're doing that too. The other thing I would say is focus on purposeful adoption and execution, not just endless pilots or experimentations.
[00:27:58] We used to invest in industrial companies in my private equity days, and then we would go through this process of hiring all these green belts from a Lean Six Sigma standpoint because you're like, "We're going to bring process efficiency and learn from the Toyota production system. And so we're going to get all these Lean six Sigma green belts will become black belts and then it's going to be great."
[00:28:17] But then all these green belts started doing projects everywhere. All of them were like, had an impact of like $2, like half of them failed. And then we took everyone away from their jobs and everyone did all this nonsense and none of it happened, because we tried to do too much across too many people.
[00:28:32] And so, while urgency is important and adoption and training is important, measure twice, cut once. Think about where you need to take that time, and then do fewer things better, get some wins, build support within your organization, and then do more, but realize you're going to have only so much that you can get done at once.
[00:28:51] Spend the time right now to prioritize where this is going to be most impactful and do it right, and then go into the next one and the next one without exhausting whatever free capacity you have in your organization for special projects.
[00:29:03] The other thing that we talked about is supporting organizational change management. This is still something that I think we've heard about it and I mentioned earlier people are resisting this and they're resisting AI, particularly in the US in ways that's really, I think, jeopardizing to the future of organizations. If you look at China and you ask people about how positive AI will be in their society, it's 80% plus. If you look at the US, it's a fraction of that. And so we're in a global competitive environment. We're also in a highly competitive US environment. You've got to explain these tools to your teams. You have to show them the wins, and you have to empower them to use them well. And so you have to be a chief repeater within your organizations around these AI tools and say like, "This is something that's going to turn you into a superhero, not a zero." If you resist the change, you're going to have a hard time keeping up.
[00:30:01] The book I speak ad nauseum on this podcast and others is Who Moved My Cheese. It's just a great parable about embracing change. It makes it so clear and so easy. If you haven't read it, one click on Amazon, listen to it on whatever platform of choice, you could probably go ahead and get a really good summary using ChatGPT, but figure this out because this is THE challenge of our day, which is really THE opportunity of our day if you run towards it.
[00:30:27] Next prediction, just a play on what we just talked about. Businesses are going to bifurcate into winners and laggards. Those who are running towards AI are going to be differentially successful than those who do not. Those who resist it will willow and ultimately fall further and further behind their peers.
[00:30:47] And this is also something where I think it'll be very interesting, and this is similar to the 90s and the internet. You're going to be able to see a lot of peer organizations and certainly even some leaders that are going to fall behind their competitors, and you're going to see distances between competitors based in large part on who runs towards these AI tools and who does not.
[00:31:08] So, once again, run towards this change. You need to move faster than your competitors in adopting them tactically and thoughtfully. You want to invest significant efforts in change management. Double tapping on that, you need to treat speed, agility, and adaptability as a core strategic asset. Now, I totally get that AI is a daunting concept for everyone, including me.
[00:31:36] There are all sorts of groups who can help you do these things well, and there's also all sorts of resources free on the internet. And so if you need some help, give us a call. We can give you the resources for free to do this. We get many calls every day for that need. The short course, I'd say on our own journey, learning from this is the first thing you need to do or maybe the first two things you need to do is A) get your data organized.
[00:31:59] This is the unsexy part of AI. If you don't have your data organized, structured, clean, and you don't invest in keeping it that way, because it will lose calibration. Anytime there's a system with rotation and force, things lose calibration. So you have to invest in keeping it clean. You really can't get the most out of any of these tools and it'll be garbage in, garbage out.
[00:32:19] So someone on your organization has to be assigned to do that and to keep it in place. It's just like maintaining a piece of equipment. The other thing is everyone in your organization should have access to a large language model. I would highly encourage you to use a large language model that has protective measures in place so that you don't democratize the confidential information in your organization.
[00:32:39] Everyone should have that in place. We give two model choices to each group. They can each pick one or the other, and so we actually find certain models are better than others. Claude is, for instance, is better at technology and coding, and then we find that ChatGPT is probably, at least right now, the best all purpose tool for most.
[00:32:58] And so make those tools available to people. And if you want some help to go to the next leg, you should be visualizing the data. You don't need to build your own neural networks. A lot of this, as we talk about in a second, we'll be going into software and it'll be easier and easier to use, but just run towards this opportunity. I can't stress that enough.
[00:33:19] Let's talk about the next one. Speaking of AI, one of the big things that's happening is the, you're going to see, and you probably already have started to see, an explosion of choice coming to the market with software tools that are not only traditional kind of enterprise-y feeling software, but they're embedded with AI that make them super powerful.
[00:33:42] And it's really the upstarts that are candidly making better use of this. We can also all think of the large legacy tools that are trying to haphazardly throw AI into it, and you get zero usage of them. The world is going to be saturated with software. And why is that? One of the very best use cases for AI today is coding software in the hands of an experienced software engineer.
[00:34:09] They can now do things in days and maybe low digit weeks that took many digit months, if not years, to do. At the bare minimum, we're seeing 30% increases in productivity, and that's only accelerating. Now, I'll reinforce that's usually at the hands of an experienced software developer. I think you still need to know what you're doing, but that gap and that requirement is getting less and less every day.
[00:34:34] So as a result of these tools, they're able to stand up ideas and software. There's this concept of disposable software, and so as an example, even me, I have zero software capabilities. I don't know any programming language. The last time I did programming was with Basic, in eighth grade for a computer science project where I did a little decider and it wasn't that great.
[00:34:56] But I'm making apps on weekends because it's just, "Oh, I wish I had this", and I'll just tell an LLM based software development system to make an app for me, and I put it on my phone. And so these things are coming.
[00:35:06] Now, here's what's going to happen. A result of that, you are going to be overwhelmed by choice. You're going to have BDRs knocking on every single door, the front door, the back door, the last door, your email, you're going to get mailers. Because they're going to apply the enterprise software strategies and you are going to be saturated with all sorts of choice. And so one thing that I think you really need to do, and I'll reinforce a lot of these themes here, start with your strategy and tie not only your AI strategy, but also your software strategy to these core strategic objectives that are going to enable the success of these strategies.
[00:35:46] So be really thoughtful about what you need and where. Spend time upfront to scope what you need, create scorecards, say "Here's what we want." Take time upfront to select the right tools, not just everyone that comes through you. For new software vendors for our company, it has to be an extraordinary product for us to even consider entering into anything more than a single year contract.
[00:36:12] So I would recommend everyone here don't enter into anything more than that. The world is changing so fast. And as an example of that, last year we brought in a new software product in our office of the CFO. It was great. Then a new one came out that was even better. And thank goodness we had a short term contract because we tore out that first software and put in the new one before the year was even done because the other one was so much better.
[00:36:37] And so if you're on a three year contract, you're basically going to be holding to their roadmap to nowhere if they're not keeping up. And so just be really thoughtful about an organization as it relates to your software strategy. The other thing that you can and should do, if you're a customer of BluWave, I would highly encourage you to call your BluWave account executive, receive a free read on what's going on.
[00:36:58] We are equipping thousands of projects and technology that relate to software, and so we have a really unique behind the curtain view as to what's being used. I would highly encourage you if you have a BluWave account manager to contact them, speak with them, and they can give you some alpha in this category for you, both the private equity firms and their portfolio companies.
[00:37:21] Okay, the last prediction, private equity deal market continues its rebound. Private equity momentum is going and going. We continue to see this in our data with a strong economy in place with high pressure from LPs demanding liquidity, which is at a fever pitch. For those who know, you can Google or ChatGPT.
[00:37:41] Add the acronym DPI. Everyone says "DPI, DPI, DPI." In PE-land, inventory within private equity is still very high, and dry powder within PE exceeds $1 trillion dollars. All of this combined, meaning the portfolio companies have had time to recover. The LPs are demanding the PE inventory, they have a lot on the shelf.
[00:38:02] There's strong capital markets. There's a growing economy, which gives a vantage and a comfort into the future to sell into. There's all sorts of measures that are really good, and as a result, you're going to see a lot of this inventory come to market in a big way. Not only because it can and should, but because it has to.
[00:38:23] And so, if you're in the PE world, be ready for it. Make sure your teams are agile. Make sure you're going to have capacity to process all of these opportunities. How do you play to win? If you're a PE firm, use these AI tools. There are certain ones you have to be careful. They need to be SEC compliant. There are certain ones that you want to make sure you have tools that are going to give you track and traceability and things that are going to keep you in good stead.
[00:38:48] Call us, we know what those tools are. You want to use these tools to give you, not only insights that equip a more competitive valuation, but use speed and certainty as a competitive advantage. And so my strong hypothesis is every PE firm that I'm friends with will over a beer tell me like, "Gosh, the values are still so high."
[00:39:09] And I totally get that and feel that, and is an individual investor in individual deals, I see that too. And you have to gulp. And then as a former 20-year PE person, I thought that multiples were high then too, and it just gets higher. Every deal has a few components. It's valuation, speed, certainty in terms. No one wants to solely compete on valuation.
[00:39:29] That's the easiest way to win a deal. Some of these tools are going to allow you to massively put coefficients on the other ones. We're going to move very quickly. We're going to move with a certainty of close, and we're going to give you some better terms that, on the legal side of the equation, not the value side of the equation, that help make you feel more certain as well.
[00:39:49] If you do that, just like every other peak deal cycle or hot deal market that we'll be entering into, you're going to get an advantage. A lot of these AI tools are going to help equip that. The other thing that I would say is, we see this when the market really starts breaking loose, and we've seen it over cycle, over cycle, over cycle, is that you're going to start having capacity constraints within your specialized service providers.
[00:40:11] A lot of the service providers have pulled back on their staffing because the deal market has been so mediocre for so long. And so you're going to really have some challenges if you're not careful. And so one way you can resolve that is give us a call. We've never not filled someone in any of the cycles.
[00:40:28] If even your go-tos aren't available, give us a buzz. The other thing that I'll say is the huge opportunity as I kind of channel all the gray hair and seeing this movie before, is that there is going to be an opportunity to stick around the hoop. I think the A's and the B pluses are going to get all the attention as they usually do.
[00:40:47] Then what happens is people don't have time for the B minuses, C pluses that have a little scuff on them. Inevitably, those deals come out, they stall and they go nowhere. And very often they're pulled. And so for those of you who look for areas where you can tangibly create value for businesses that aren't perfect, and I'm not saying turnaround businesses even just like they're not all boxes checked, I think there's going to be a huge opportunity.
[00:41:11] Stay close to your investment bankers. Make sure you come back to them. If you do, go pencils down and make sure you're in. Say we're very interested so that inevitably when these deals come back, you're ready to go and you can probably get a great value opportunity in this market. That was the story of my life across multiple cycles where I just never followed up with the company.
[00:41:31] And then you see the deal trades, and then you talk to the investment banker and they kind of wink, wink, nod, nod, tell you what it went for, and then you go, "Oh, we would've paid that amount, but we didn't stick around the hoop." So lesson learned.
[00:41:44] So I think a lot of really exciting stuff is coming up in 2026. Hopefully after listening to this first part of this episode, you can see why I'm so super excited.
[00:41:55] Let's wrap up and talk about how we did with our predictions in 2025. I'll try to go through these relatively briefly. I think net-net we did pretty well, and so the predictions we made at the end of 2024 for 2025 were as follows.
[00:42:13] We predicted the M&A market was going to rebound. We predicted a manufacturing renaissance. We predicted a flattening of organizations. We predicted that inflation will be sticky, and then we predicted that the next economic cycle is underway. So hopefully by the first half of this episode and with humility, you'll hear us say, "Oh, we did pretty well."
[00:42:32] And some of these seem obvious now, but in '24, I think a lot of people were calling for recession. And so we said that the M&A market was going to rebound. I think we did well there. It came back, it came late, but ultimately it happened. And so I think that one was right.
[00:42:45] Manufacturing renaissance, I think that's the one that we were too early on and missed. It started happening, but not quite yet. And so we look at 11, 12 months of PMI growing. You look at growing NAM manufacturer outlook, serving confidence, growing. Capital equipment starting to take up. You see a lot of measures within manufacturing starting to shine. We haven't seen the big investments in capital footprint in new facilities yet. We have not seen the repatriation of foreign facilities back into the US.
[00:43:22] I think part of that's going to be tied to demand and further down the cycle in the economic recovery. I think we will also see a lot of that tied with the tax incentives related to capital equipment purchases. If there is any time to build a plant in the United States, it's within the term of this "Big Beautiful Tax Bill", quote unquote not my words,
[00:43:44] that allows these amazing incentives to put it in, equip a plant, and so I think it will continue to do so, and I think it will do so not just because of incentives, because it's strategic for the United States, and we're going to continue to make it difficult to make everything including key strategic items outside of the United States. There are things that we need to be able to have as we have global rivals.
[00:44:06] Now, next thing we predicted flatter organizations. We said that AI is really going to lead to a flattening of the world. We thought there was going to be fewer middle level managers and a reduction of entry level positions. I think we got that mostly right so far.
[00:44:23] Where we're really seeing it happen right now is the reduction in the entry level positions. As I mentioned earlier, I think companies need to be careful about that. You don't want to totally just cut off your talent supply because ultimately you're going to be lacking in your middle. But we are also seeing the middle being able to use these tools.
[00:44:41] There's a certain level of sophistication experience that turns a human into a superhuman with the power of an AI tool given to them. And that's hard to replicate versus saying, just coming right out of college, "I'm going to be able to do things." And so I think where we got it right was that the entry level is definitely thinning that has a whole host of cashflow positive implications in the short term for businesses.
[00:45:04] It has a whole host of other issues that we have to be mindful of for the longer term. As you think about kids that are leaving college or are in college right now, I can't stress this enough: make sure that you are expert in these AI tools by the time you get to your internships and your interviews, because you are now expected to act not like a 22-year-old like I was.
[00:45:27] I was probably expected to act like an 18-year-old. 90s were different. But you're going to have to act like a 25-year-old and so know how to use these tools, invest in yourself so that by the time you come and they say, what can you do, you're teaching the old gray hairs how to do this stuff, and suddenly you're going to be the most sought after person in the organization.
[00:45:45] So one of the just unsolicited pieces of advice: if you have kids or you are a college student, make sure you're expert in them and then you know how to use them and study up and get smart just like you are across a whole host of topics during your academic career.
[00:46:00] Next thing we predicted was inflation will be sticky. I think it was quite sticky. It went down and then up and then moderated down. I think it's going to stay in the mid to high 2s for a while, if not for a long time, it's just going to be hard to do everything at once. You can't cut taxes, you can't have tariffs, you can't provide all the stimulus and then keep inflation at 2%, it's just the math doesn't work. And so at this point, with the deficits that we have and the amount of things we have to do in the US economy to set ourselves up for longer term success, something has to give. And I think we're just going to have to deal with higher inflation for longer.
[00:46:37] Last prediction we made for 2025 was the next economic cycle is underway. I think we got that one right. Once again, it was late, it happened later in the year. It wasn't obvious that we were going to get this right for much of the first half of last year, but ultimately the quarter closed, GDP's accelerating, the job market remains within full employment. 4.5%, ultimately is the definition, even 5% sometimes we're at the upper ground to full employment.
[00:47:00] It's not great in health right now, for sure. But it's still within that range. Productivity is gaining, consumers are surprising and resilient. And then you've got other recessionary segments coming out, like in manufacturing and coming up beyond to keep this recovery and economic gain underway. You've got all sorts of stimulus that we just talked about previously.
[00:47:22] So net-net, I think we did pretty well on our predictions. And the only reason we're able to do that is we get to see what a statistically significant percentage of the best business builders in the world do every single day. And then we can look at those patterns and it sounds insane to a certain degree when I hear me say this, but it allows us to see the future.
[00:47:46] So hopefully all of this information gives you a little bit more information, alpha, and edge to be more successful in the days ahead. If you would like to see anything more behind this conversation, you can go to our website or speak with your account manager if you have one and are a customer of BluWave, and they can give you the report that'll share a whole lot more than what we talked about here today.
[00:48:14] You can also call us and talk. We share what we see every day with all of our customers, and we're free to use for most of what we do. So I hope this once again is helpful. Good luck to an amazing 2026.
[00:48:39] That's all we have for today. If you'd like to learn more about the Private Equity Insights report, please see the episode notes for links. Please continue to look for the Karma School of Business Podcast anywhere you find your favorite podcast. We truly appreciate your support. If you like what you hear, please follow five star rate, review and share, it's a free way to support the show and it really helps us when you do this, so thank you in advance. In the meantime, if you want to be connected with the world's best in class private equity grade professional service providers, independent consultants, interim executives, that are deployed and trusted by the best business builders in the world, including many hundreds of top PE firms and thousands of their portfolio companies, and you can do the same whether or not you're in the PE world, give us a call, or visit our website at BluWave.net., and we'll support your success. Onward.
[00:49:25] The views and opinions expressed in this program are those of the individuals presenting, and do not necessarily reflect the views or positions of any other persons or entities, including those referenced herein. No representations, warranties, financial, legal, tax, or other advice are made herein. Consult your advisors regarding any topics discussed during this episode.
THE BUSINESS BUILDER’S PODCAST
Private equity insights for and with top business builders, including investors, operators, executives and industry thought leaders. The Karma School of Business Podcast goes behind the scenes of PE, talking about business best practices and real-time industry trends. You'll learn from leading professionals and visionary business executives who will help you take action and enhance your life, whether you’re at a PE firm, a portco or a private or public company.
BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.
BluWave Founder & CEO Sean Mooney hosts the Private Equity Karma School of Business Podcast. BluWave is the business builders’ network for private equity grade due diligence and value creation needs.
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