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 spotlight the middle-market medtech sector's emergence as a prime PE target, driven by demographic shifts, regulatory consolidation pressures, and AI convergence creating unprecedented deal opportunities. 

We examine Federal Reserve Chair Jerome Powell's Jackson Hole remarks signaling potential September rate cuts and their implications for PE deal financing, the risks of private equity democratization as retail access could transform the industry into "another overregulated public market." 

We breakdown Thoma Bravo's $2 billion acquisition of Verint Systems as part of a broader AI-powered customer experience consolidation play. 

Additionally, we analyze European PE's cautious H1 2025 recovery amid geopolitical tensions and the geographic shift in venture funding as AI continues to dominate deal flow beyond traditional Silicon Valley hubs.

Enjoy the newsletter!

Compass Points

Key insights at a glance:

• Powell's Remarks Point to Policy Supporting PE Deal Activity: Federal Reserve Chair Jerome Powell's Jackson Hole remarks signaled potential September rate cuts as the Fed balances inflation management with supporting growth amid decelerating labor market dynamics. The prospect of lower rates presents favorable conditions for PE financing availability and deal activity, making leveraged transactions more attractive while potentially unlocking deal flow constrained by higher rate environments.

• PE's Medtech Gold Rush: Medtech has emerged as a prime target for middle-market private equity investment in 2025, driven by three converging forces: an aging global population creating sustained demand for medical devices, regulatory pressures that favor consolidation among smaller players, and the convergence of AI and digital health technologies requiring integrated solutions. Industry experts emphasize that successful medtech investments require looking beyond innovation to focus on regulatory compliance, true product adoption rates, and strong commercial infrastructure, with companies needing 12-18 months of preparation to maximize exit valuations.

• European PE Markets Navigate Cautious Recovery: European private equity markets experienced mixed performance in the first half of 2025, with deal activity up modestly by 2% year-over-year but remaining constrained by geopolitical tensions and policy uncertainty. Middle-market deals between €250 million and €1 billion continued to dominate activity as investors sought niche opportunities, while healthcare and life sciences gained market share alongside resilient industrials and financial services sectors. 

• How Retail Access Could Transform PE Into "Another Overregulated Public Market": Private equity firms are aggressively pursuing retail investors as a vast new capital source, capitalizing on PE's impressive 15% annualized returns over two decades and recent regulatory support including Trump's executive order easing 401(k) access to private markets. However, this "democratization" movement faces significant structural challenges that could fundamentally alter PE's defining characteristics and create systemic risks. The influx of retail capital brings liquidity demands and shorter investment horizons that contradict PE's reliance on patient, locked-up capital, while triggering ERISA compliance requirements once retirement investments exceed 25% of fund assets

• AI Dominates $1.6B Weekly VC Haul as Startup Funding Spreads Beyond Silicon Valley: Weekly venture capital funding reached approximately $1.6 billion across the top ten U.S. deals, marking a notable geographic shift as only two rounds went to Silicon Valley companies while Seattle, Southern California, New York, and Austin captured the largest investments. Artificial intelligence drove four of the ten biggest deals, including Field AI's $405 million dual-round for robotics software, EliseAI's $250 million Series E for housing automation, and Ontic's $230 million for AI-powered security tools.

Deep Dive: Middle Market Medtech Emerges as PE’s Prime Target in 2025

Middle-market medical technology has captured the attention of private equity investors in 2025, driven by a convergence of demographic shifts, regulatory dynamics, and financing innovations that are reshaping the deal landscape. With global healthcare PE investment reaching nearly $115 billion in 2024 and valuations holding at a robust median multiple of 21× EBITDA (data from Bain & Co.), the sector represents what many consider the optimal blend of healthcare's defensive characteristics with technology's growth potential.

The Demographic and Regulatory Drivers

The medtech investment thesis rests on three foundational pillars that are creating sustained deal activity. The aging global population—projected to reach one in six people over 60 by 2030—is driving unprecedented demand for medical devices across chronic conditions like diabetes and cardiovascular disease. This "Silver Tsunami" translates directly into market expansion for everything from glucose monitors to cardiac implants, providing PE investors with visibility into long-term demand growth.

Simultaneously, regulatory pressures are accelerating consolidation opportunities. The EU's Medical Device Regulation has increased compliance costs, creating acquisition targets among smaller European medtech players seeking acquirers who can absorb regulatory burdens. Scale advantages in navigating FDA approvals and complex reimbursement coding increasingly favor larger platforms, sending a clear market signal: consolidate or struggle.

The third driver is innovation convergence, particularly around AI-powered diagnostics, robotic surgery platforms, and connected devices. As hardware, software, and data integration blur traditional boundaries, companies offering integrated solutions command premium valuations. This technological evolution is accelerating M&A activity as traditional device makers acquire software capabilities while tech firms purchase hardware assets to control proprietary health data.

Middle Market Deal Mechanics

The middle market has become the epicenter of medtech deal activity, driven by three distinct catalysts that are reshaping investment strategies. The sector's fragmentation presents ideal roll-up opportunities, with countless niche players holding specialized intellectual property but lacking distribution capabilities. PE firms are executing aggressive buy-and-build strategies, acquiring platform companies and systematically adding bolt-on acquisitions to create market-dominating entities.

"In medtech deal sourcing, platform identification should come before individual targets—and the strongest platforms are typically found off-market," explains Frank Scarpelli, CEO of Private Capital Global and Sparc Partners. "Smart PE firms are building sourcing strategies around acquiring platform companies through proprietary relationships, then systematically adding bolt-on candidates that complement the platform's capabilities."

The convergence of digital health and traditional medtech has eliminated the line between device manufacturing and health IT. Connected insulin pumps with subscription-based diabetes management now represent both device revenue and recurring SaaS income, creating hybrid business models that appeal to PE investors seeking predictable cash flows alongside growth potential.

Financing Evolution Fuels Activity

The capital markets have evolved to support this deal frenzy, with private credit playing an increasingly central role. Direct lenders now represent $1.6 trillion in assets under management globally, with healthcare capturing approximately 20% of direct lending deals in 2024. This evolution has democratized medtech M&A, enabling mid-sized PE funds to compete with large-cap players without traditional bank lending constraints.

Unitranche loans are streamlining deal execution while seller rollovers bridge valuation gaps and align incentives. Recent transactions have been backed by €1+ billion unitranche facilities, demonstrating the scale at which direct lenders can operate and providing deal certainty that traditional bank syndicates often cannot match.

Due Diligence Critical Success Factors

Industry experts emphasize that successful medtech investing requires looking beyond innovation to focus on regulatory compliance and true market adoption. Thomas Busby notes that regulatory pitfalls often emerge during institutional diligence, particularly for companies that may have unknowingly crossed compliance barriers during their growth phase.

"The focus should be on product usage rates and true adoption, rather than mere revenue generation," Mr. Busby emphasizes. "Investors should seek those devices that are becoming part of a physician's 'everyday toolbox' rather than 'nice to have' options."

Commercial infrastructure represents another critical evaluation criterion. Premium multiples are reserved for companies with disciplined growth infrastructure already in place, including robust CRM systems, appropriately mapped sales territories, and the organizational capability to support expanded commercial launches.

"This buy-and-build approach demands deep sector expertise to navigate the regulatory complexity and clinical validation requirements that create information asymmetries," Mr. Scarpelli adds. "Real success comes from combining platform-focused sourcing with specialized advisory guidance and curated industry relationships."

Market Outlook

The medtech middle market presents a compelling investment environment in 2025, supported by demographic certainties, regulatory consolidation pressures, and abundant private credit availability. The sector's fragmentation creates clear roll-up opportunities while sustained demand growth provides visibility into long-term returns. For PE investors with the sector expertise to navigate regulatory complexity and identify true platform opportunities, medtech represents one of the year's most compelling investment themes..

Deal Spotlight: Thoma Bravo & Verint Systems Agree to $2B Deal

Transaction: Thoma Bravo has agreed to acquire Verint Systems (NASDAQ: VRNT) in an all-cash transaction valued at $2 billion enterprise value, paying $20.50 per share, an 18% premium to the company's unaffected share price. The deal represents Thoma Bravo's latest bet on AI-powered customer experience automation, with Verint's platform serving over 80 Fortune 100 companies. Upon closing, Verint will be combined with existing Thoma Bravo portfolio company Calabrio to create what the firm calls "the industry's broadest CX platform."

Why it Matters: This acquisition underscores the premium valuations AI-focused software companies continue to command in the current market, particularly those with strong enterprise customer bases and recurring revenue models. Verint's AI Annual Recurring Revenue now represents 50% of its total ARR, demonstrating the successful monetization of artificial intelligence capabilities that private equity firms are aggressively pursuing. The strategic combination with Calabrio highlights Thoma Bravo's buy-and-build approach, creating scaled platforms that can better compete in consolidated markets. For the broader private capital community, this deal signals continued confidence in enterprise software roll-ups, especially those positioned at the intersection of AI and customer experience.

The current environment demands operational excellence beyond traditional financial engineering, requiring PE operators to build comprehensive value creation capabilities that drive sustainable growth and optimize exit valuations across their investment lifecycle.

• Financial Operations Excellence: Implement rigorous due diligence frameworks that identify hidden value drivers and operational inefficiencies early in the investment process. Establish CFO-level accounting strategies including revenue recognition optimization, working capital management, and tax structure enhancement. Deploy advanced financial planning systems that provide real-time visibility into portfolio company performance and enable proactive intervention when metrics deviate from projections.

• Human Capital Optimization: Develop systematic talent acquisition strategies that identify and attract industry-leading executives who can scale operations during rapid growth phases. Build retention programs that align management incentives with long-term value creation while implementing leadership development initiatives that prepare portfolio companies for eventual strategic exits.

• Risk Management and Protection: Establish comprehensive compliance frameworks that navigate evolving regulatory landscapes, particularly in healthcare and technology sectors where regulatory changes can materially impact valuations. Deploy cybersecurity infrastructure and insurance coverage that protects against operational disruptions and data breaches that could derail exit strategies.

• Technology-Driven Efficiency: Leverage artificial intelligence and automation tools to optimize operational processes, reduce costs, and improve decision-making across portfolio companies. Implement data analytics platforms that provide actionable insights into market trends, customer behavior, and competitive positioning to inform strategic initiatives and value creation opportunities.

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

Thank you for reading this week's edition of The Private Capital Compass. The strategies we've highlighted this week, from medtech's demographic-driven consolidation opportunities to Powell's accommodative monetary policy signals, demonstrate how private equity success increasingly depends on identifying sector-specific tailwinds while maintaining rigorous operational discipline.

We hope this edition provided actionable insights into the shifting dynamics reshaping value creation across private markets.