Geopolitical risks emerge as a significant threat for investments in portfolio companies during the second half of the year
Antares Capital's Mid-Year 2025 Credit Market Outlook Survey reveals that geopolitical risk, sales volume, and interest rates are the top challenges for portfolio companies as they enter the second half of the year.
According to the survey, geopolitical risk has risen to the top challenge, followed closely by concerns about sales volume demand and the impact of interest rates. M&A (mergers and acquisitions) was noted as the top priority for capital deployment, indicating a focus on growth and strategic transactions despite the challenges.
Portfolio companies are generally expecting modest to strong revenue and EBITDA growth for the remainder of 2025, leveraging price increases, cost management, and M&A activities to drive performance. Around half of them expect headcount to stay flat or decline compared to prior years.
Interestingly, tariff concerns moved up significantly as a challenge, according to the survey. However, the report does not mention any increase in geopolitical risks as a challenge for the second half of 2025.
Doug Cannaliato, co-head of originations at Antares Capital, stated that the economic outlook following Liberation Day in April has eased. The report also suggests a moderate increase in new deal activity heading into the second half of 2025, with Doug Cannaliato expecting the steady pace of new deal activity to continue for the remainder of the year.
Despite the challenges, portfolio companies are feeling less cautious about the economic outlook compared to the shock of Liberation Day in April. However, they are less bullish about deploying capital for the remainder of 2025 than they were over the same period in 2024. The report does not provide any information about the anticipated level of capital deployment in new platforms for the remainder of 2025 compared to prior years.
In the realm of finance, the survey indicates that M&A activities (mergers and acquisitions) are the top priority for capital deployment, signifying a focus on growth and strategic transactions despite the identified challenges. The survey further reveals that concern about tariffs has escalated, alongside geopolitical risk, sales volume demand, and interest rates, which are the top challenges for portfolio companies as they navigate the second half of the year.
