Welcome to this week’s edition of The Private Capital Compass, brought to you by Private Capital Global (PCG), a Sparc Group company. This week, we examine a market shaped by both policy uncertainty and structural transformation, as sharp divisions within the Federal Reserve over inflation and labor trends leave the prospect of a December rate cut finely balanced and private capital investors reassessing borrowing costs, LBO structures, and valuation dynamics.

We also spotlight CD&R’s proposed $6.2 billion acquisition of Sealed Air, a deal that underscores ongoing private equity interest in resilient industrial and packaging assets and highlights trends in operational turnarounds, go-shop provisions, and the growing use of take-private strategies to accelerate transformation.

Finally, our deep dive focuses on how sponsors are navigating a high-rate environment defined by persistent inflation, extended holding periods, and tighter liquidity. From embedding value creation at the LOI stage to leveraging secondary market solutions and concentrating capital in high-conviction sectors such as healthcare, medtech, AI, and industrial manufacturing, we unpack the strategies enabling investors and operating partners to thrive amid uncertainty.

Compass Points

Key insights at a glance:

• Fed Divided on Rate Cuts as Economic Signals Confuse Markets: Sharp disagreements among Federal Reserve officials over persistent inflation and sluggish hiring have turned the prospect of a December rate cut into a 50-50 proposition, rattling markets and introducing new uncertainty for private capital investors. While some policymakers emphasize the need to contain elevated prices, others cite a near-stalled labor market as a reason to reduce rates. This split signals that borrowing costs may remain elevated longer than expected, affecting leveraged buyouts, portfolio company refinancing, and valuations across sectors. Disciplined capital allocation, operational efficiency, and selective dealmaking will be essential in a market where interest rate direction is uncertain and cost of capital may stay high.

• Generative AI Is Forcing a Reinvention of Venture Capital: A Harvard Business Review analysis shows that generative AI is reshaping the venture capital ecosystem at unprecedented speed, transforming how startups are pitched, built, and funded while altering the internal operating models of VC firms themselves. With global private AI investment hitting $252 billion in 2024, VCs now see AI embedded in nearly every tech deal and founders are using AI tools to accelerate research, build demos, reduce headcount, and scale faster with less capital. This shift is driving a surge in high-volume, mixed-quality pitches and enabling “tiny team” startups to reach massive revenue milestones, even prompting predictions of the first “one-person unicorn” by 2026. Yet despite AI’s expanding role, VCs emphasize that human judgment, founder psychology, learning agility, proprietary data, and true AI-native architectures remain decisive differentiators. Looking ahead, the industry may polarize between mega-funds and highly specialized boutiques, with some envisioning AI-driven VC firms.

• Ultra-Wealthy Family Offices Buy the Dip as Markets Hit Record Highs: An analysis from CNBC shows that ultra-rich family offices leaned into beaten-down equities last quarter even as global markets surged to record highs. Family offices backed by hedge-fund titans such as David Tepper, Carl Icahn, and Leon Cooperman deployed their sizable capital reserves into distressed consumer, industrial, and health insurance names, doubling down on stocks like Whirlpool, Goodyear, International Flavors & Fragrances, Cigna, and Elevance Health. At the same time, many continued selectively riding the Magnificent Seven rally, with Soros Fund Management and the Duquesne Family Office taking fresh or enlarged positions in Amazon, Apple, Meta, and Nvidia. Unlike traditional institutional investors constrained by mandates or short-term performance windows, family offices are increasingly acting as opportunistic capital: comfortable with contrarian bets, sector dislocation, and multi-year turnaround plays.

• Family Office Foundations: Governance First, Investments Second: Launching a family office after a liquidity event requires deliberate planning, with governance and operational structure taking precedence over portfolio strategy. Institutional Investor highlights that families should first appoint a central coordinator to manage day-to-day operations, establish a clear mission statement to guide investment and philanthropic decisions, and define which family members are included in the office. Prioritizing these elements early ensures alignment, operational efficiency, and long-term sustainability, while minimizing future conflicts as wealth passes to subsequent generations. Understanding these foundational steps can unlock opportunities to support families in structuring resilient offices, aligning investments with mission, and embedding disciplined operational oversight from the outset.

• Private Markets Double Down on Decarbonization: According to research from Bain & Co., private markets are advancing decarbonization efforts even as public-sector momentum and regulatory pressure waver. Bain’s global survey of GPs and LPs shows that nearly all investors now incorporate emissions assessments into due diligence, and most view decarbonization as a long-term creator of value that enhances fund-raising. Adoption of the Private Markets Decarbonization Roadmap (PMDR), developed by Bain & Co., iCI, and the Sustainable Markets Initiative, is accelerating, with users reporting high satisfaction and measurable improvements in portfolio visibility, communication, and performance. While gaps remain in climate data quality and emissions tracking, early movers using PMDR are already capturing operational and commercial upside, reinforcing Bain’s conclusion that decarbonization is becoming a strategic lever for competitive advantage rather than a mere compliance exercise.

Deal Spotlight: CD&R to Acquire Sealed Air for $6.2 Billion

Transaction: Sealed Air, the North Carolina-based packaging company known for brands like Bubble Wrap, Cryovac, and Autobag, has entered a definitive agreement to be acquired by private equity firm Clayton, Dubilier & Rice (CD&R) for $6.2 billion, or $42.15 per share in cash, representing an overall enterprise value of $10.3 billion. The deal, approved by Sealed Air’s board, is expected to close by mid-2026 pending regulatory and shareholder approvals and will result in Sealed Air delisting from the New York Stock Exchange. The agreement includes a 30-day “go-shop” period through December 16, allowing Sealed Air to solicit competing bids. The company generated approximately $5.4 billion in revenue last year, and its current turnaround plan includes cost reduction, operational streamlining, and strategic refocusing on its food and protective packaging segments. CD&R has previous packaging experience, including its 2023 acquisition of Veritiv.

Why It Matters: This transaction underscores ongoing private equity appetite in the industrial and packaging sectors, particularly for resilient, global companies with operational turnaround potential. Packaging has become a hotbed for consolidation and value creation, driven by evolving e-commerce demand, cost pressures, and sustainable packaging initiatives. The Sealed Air deal highlights several market trends: sponsors are targeting stable cash-flow businesses with opportunities for operational improvement, while structured “go-shop” provisions create space for competitive bidding and valuation discovery. Comparisons can be drawn to Apollo-backed Novolex’s $6.7 billion acquisition of Pactiv Evergreen, illustrating how PE investors are willing to pay premiums for scale, brand equity, and strategic positioning in high-demand subsectors. Additionally, the deal signals the continued attractiveness of delisting strong industrial businesses to unlock private capital flexibility, accelerate transformation plans, and deploy capital toward innovation and expansion. For operating partners, this transaction reinforces the importance of pre-close operational assessments and post-acquisition growth playbooks, particularly in sectors undergoing rapid structural change.

Deep Dive: Navigating Private Capital in a High-Rate Environment

In 2025, the U.S. private capital landscape is being reshaped by persistent inflation, high interest rates, and subdued economic growth. With the Federal Reserve holding rates near multi-decade highs, sponsors, investors, and operating partners face tighter liquidity, longer exit timelines, and a renewed focus on operational rigor from the earliest stages of deal execution. These macroeconomic pressures are redefining fundraising, deal structuring, and sector allocation, prompting the market to favor conviction-driven, quality-focused strategies over sheer deal volume.

High Rates and Prolonged Holding Periods

Elevated borrowing costs and constrained growth are extending holding periods well above historical norms. Traditional exit channels remain sluggish, delaying distributions and stretching preferred return timelines for LPs. In response, private equity firms are increasingly leveraging secondary market solutions, including GP-led secondaries and continuation funds, to provide liquidity, crystallize returns, and redeploy capital into portfolio companies with clear operational upside. These mechanisms are central to navigating a high-rate, low-growth environment.

Despite these headwinds, U.S. private equity dealmaking has shown resilience. Q3 2025 witnessed $300.2 billion in private equity investment, according to KPMG’s Private Equity Pulse Report. Dealmakers are prioritizing quality, targeting assets with proven cash flows, defensible market positions, and strong operational levers. Sector focus has sharpened around healthcare and medtech, AI and technology, and industrial manufacturing.

Healthcare and Medtech: Defensive Yet Strategic

Healthcare and medtech continue to attract capital for their recession-resistant fundamentals and innovation potential. High-profile transactions, such as Blackstone and TPG’s $18.3 billion acquisition of Hologic, illustrate the market’s appetite for platform investments with global growth potential. These deals emphasize recurring revenue models, intellectual property defensibility, and measurable clinical impact, underscoring the importance of operational excellence and long-term value creation even amid broader market caution.

AI and Technology: Driving Mega-Deals

Technology remains a primary target for private capital, particularly companies at the intersection of AI, software, and automation. The $54.7 billion take-private of Electronic Arts by a consortium led by Affinity Partners highlights continued investor interest in platform businesses with robust digital infrastructure and scalable recurring revenues. AI-driven platforms are increasingly seen as strategic engines for operational efficiency, commercial acceleration, and data monetization across industries.

Industrial and Manufacturing Resilience

Industrial and manufacturing deal activity has remained robust, fueled by reshoring, automation, and infrastructure investment. Transactions such as Baker Hughes’ acquisition of Chart Industries demonstrate how sponsors are positioning portfolios to capture structural shifts in energy, supply chain, and climate-related technologies. Even amid renewed tariffs and cost pressures, the sector is attracting capital for its long-term growth potential and adaptability.

Fundraising and Capital Allocation Shifts

Fundraising in this environment favors established managers and selective LP commitments. Family offices, projected to manage $5.4 trillion in assets by 2030, and private credit vehicles are increasingly central to capital formation strategies. Continuation funds, secondary transactions, and alternative structures are essential tools for sponsors seeking liquidity flexibility while maintaining exposure to high-conviction assets. Venture capital, while concentrated, continues to flow toward AI and technology platforms, reflecting a broader preference for defensible, scalable opportunities.

Implications for Investors and Operating Partners

Private capital leaders must prioritize quality over quantity, embrace sector convergence, and leverage innovative capital solutions to deliver value. Geographic diversification, cross-border M&A, and flexible fund structures are becoming standard tools for navigating a complex, high-rate market. While macro conditions have challenged private capital markets, disciplined sponsors are finding opportunities to create value, particularly in sectors with resilient growth drivers and operational upside. The current environment rewards careful selection, early value creation, and innovative capital strategies.

The Federal Reserve’s near-decade-high interest rates, coupled with longer holding periods and tighter liquidity, demand that private capital sponsors and operating partners embed value creation strategies from the Letter of Intent (LOI) stage. Early alignment ensures that each investment is structured for resilience, operational leverage, and long-term growth, even when exit timelines are extended and borrowing costs remain elevated.

By mapping operational initiatives, commercial acceleration strategies, and talent and technology priorities before closing, sponsors can identify synergies, optimize cost structures, and mitigate execution risk. High-conviction sectors such as healthcare, medtech, AI, and industrial manufacturing highlight how early operational planning translates into scalable, defensible portfolios, particularly as macro pressures test traditional deal models. The market rewards disciplined, data-driven approaches over opportunistic volume. Secondary market solutions, continuation funds, and alternative financing are increasingly deployed to preserve capital flexibility but their effectiveness depends on a well-defined, pre-close operational roadmap.

Action for Sponsors and Operating Partners: Start every investment with a value creation assessment at LOI. Establish your playbook early, identify operational levers, and align your deal team on execution priorities. This approach not only protects against macroeconomic headwinds but also positions your portfolio for superior returns, regardless of rate cut uncertainty or prolonged exit timelines.

Opening & Closing Remarks from Erik Boender, Vice President & COO, Private Capital Global (a Sparc Group company)

Thank you for joining us for this week’s edition of The Private Capital Compass. As we look ahead to 2026, we’re excited to continue the conversation across our events in Austin, Boston, Chicago, London, New York, and San Francisco. Be sure to subscribe to The Private Capital Insiders podcast, hosted by Frank Scarpelli, for direct insights from leading dealmakers and industry experts navigating today’s dynamic private capital landscape. Our goal remains the same: to keep you informed, inspired, and ready to translate market insight into actionable strategies across your investments and portfolios.