As we move through 2025, the phrase “finding alpha” has become the mantra for private equity (PE) investors focused on the consumer sector. Confidence in the sector remains robust, but the narrative has shifted: it is no longer about broad-based acquisition strategies. Instead, the focus is on select, high-performing assets which outperform their market—particularly those founder-led or family-owned businesses that have achieved scale and are now ripe for PE investment.
Selective Opportunities and Competitive Dynamics
The current environment is not characterised by indiscriminate deal-making. Rather, PE firms are zeroing in on assets with proven growth, strong cash generation, and clear market differentiation. In these cases, deal processes are bifurcated: either hyper-competitive auctions for the most attractive assets, or bilateral negotiations with founders where long-standing relationships are pivotal.
While bilateral negotiations may avoid the intensity of competitive auctions, they are no less complex. Successfully executing these deals demands meticulous preparation and a high degree of emotional intelligence to ensure that investors and founders are aligned—not just on terms, but on a shared vision for growth and the path to achieving it. Most of all, over the next six months, these relationships—carefully cultivated over years—will be put to the test, as founders seek partners who can help them reach the next stage of growth.
Relationship-Driven Deals and Untapped Value
The consumer sector, especially segments like beauty and personal care, is seeing a surge in interest from PE. These markets have historically been underpenetrated by institutional capital, leaving significant untapped value. Recent success stories, such as Medik8 and Summer Fridays, illustrate the potential for outsized returns when PE partners with high-growth, cash-generative businesses. These companies offer rich data points on performance and scalability, making them attractive targets for investment.
Operational Value Creation: Beyond Financial Engineering
In today’s market, simply leveraging a business and hoping for multiple expansion is no longer sufficient. Sellers are becoming increasingly creative, especially when IPO exits are not viable. Options such as continuation funds, minority stake sales, and bringing in new partners for longer hold periods are all on the table. This environment demands a hyper-focus on operational value creation.
PE firms are now expected to provide meaningful operational support—ranging from strengthening executive management teams and engaging operating partners, to investing in IT and digital infrastructure. The goal is to ensure that businesses scale efficiently and sustainably, maximising both growth and value creation.
The Role of Technology and Digital Transformation
Technological advancement, particularly in AI and digital marketing, is a critical lever for value creation. Firms that fail to capitalise on this window risk stagnating valuations. Conversely, those that invest in digital infrastructure and data-driven marketing strategies are well-positioned for a “hockey stick” trajectory in both business performance and exit valuations. This is especially true in consumer-facing businesses, where digital engagement and personalisation are key differentiators.
Creative Exit Strategies and Investor Returns
With traditional exits such as IPOs less certain, PE sellers are exploring alternative strategies to return value to investors. This includes holding assets longer, selling minority stakes, or structuring continuation vehicles. Each approach requires a thoughtful evaluation of the available levers to enhance multiples and deliver returns, reinforcing the need for deep operational engagement and strategic foresight.
The next six months represent a critical window for private equity in the consumer sector. The firms that will succeed are those that combine strong relationships with founders, a disciplined focus on high-performing assets, and a willingness to roll up their sleeves and drive operational improvements.
In a market where cash generation and digital transformation are paramount, “finding alpha” is less about financial engineering and more about building sustainable, scalable businesses. The hard work is just beginning, but the rewards for those who get it right could be substantial.
