Becker Business Podcast
Episode: Private Equity Outlook for 2026 with Craig Castelli of Caber Hill Advisors
Host: Scott Becker
Guest: Craig Castelli, Founder & CEO, Caber Hill Advisors
Date: February 2, 2026
Overview
This episode dives into the private equity landscape for 2026, guided by insights from Craig Castelli, whose firm annually surveys private equity participants. Together with host Scott Becker, they explore survey findings, sector trends, deal drivers, headwinds, and what to expect in the coming year—particularly for lower middle market deals, healthcare services, and differentiated business models.
Key Discussion Points & Insights
1. 2025 in Review: Volatility and Adaptation
- Market cycles compressed:
- “2025 was an interesting year to say the least. I like to say I think we lived three business cycles all within a 12-month period.”
(Castelli, 01:59)
- “2025 was an interesting year to say the least. I like to say I think we lived three business cycles all within a 12-month period.”
- Strong start, abrupt pause:
- Markets entered 2025 “on fire,” matching post-COVID M&A activity.
- “And then Liberation Day happened... injected a huge amount of uncertainty... and we had this pause that lasted almost the entire quarter.” (Castelli, 02:37)
- Uncertainty’s chill:
- “Uncertainty is bad for deals. It’s bad because lenders don’t want to lend money. It’s bad because entrepreneurs aren’t really sure how they should react or, or what they should do.”
(Castelli, 02:48)
- “Uncertainty is bad for deals. It’s bad because lenders don’t want to lend money. It’s bad because entrepreneurs aren’t really sure how they should react or, or what they should do.”
- Big firms struggled:
- Major funds like Blackstone and KKR suffered losses due to fewer exits despite strong fee incomes.
(Becker, 00:57)
- Major funds like Blackstone and KKR suffered losses due to fewer exits despite strong fee incomes.
2. Survey Methodology and Respondent Profile
- Lower-middle market focus:
- 70% of surveyed funds target companies with $1–10 million EBITDA; 25% target $10–25 million, and only 5% $25–50 million.
(Castelli, 04:35)
- 70% of surveyed funds target companies with $1–10 million EBITDA; 25% target $10–25 million, and only 5% $25–50 million.
- Main sectors:
- “Top four sectors these firms are targeting: industrial manufacturing, business services, facility services... and health care.”
(Castelli, 05:06)- Also some representation from real estate, energy, and telecom.
- “Top four sectors these firms are targeting: industrial manufacturing, business services, facility services... and health care.”
3. Private Equity Expectations for 2026
- Widespread bullishness:
- “82% of respondents expect 2026 to be a stronger year overall. 86% expect to see deal volume increase.”
(Castelli, 07:23)
- “82% of respondents expect 2026 to be a stronger year overall. 86% expect to see deal volume increase.”
- Key market drivers:
- “Dry powder—there’s still a ton of capital that needs to be put to work... Second biggest factor was macroeconomic growth.”
(Castelli, 07:40)
- “Dry powder—there’s still a ton of capital that needs to be put to work... Second biggest factor was macroeconomic growth.”
- 2026 as a “catch-up” year:
- “Common sentiment that 26 will be the year we thought 25 will be.”
(Castelli, 03:41)
- “Common sentiment that 26 will be the year we thought 25 will be.”
4. Sector-Specific Insights
Healthcare Practices
- Mixed liquidity:
- “There are a lot of companies stuck in private equity portfolios especially on the healthcare services, the physician practice management side...”
(Castelli, 08:48)
- “There are a lot of companies stuck in private equity portfolios especially on the healthcare services, the physician practice management side...”
- Differentiation matters:
- “If you have a true differentiated model that stands out from the fray, the appetite is robust and... investors... are throwing out huge offers...”
(Castelli, 09:25)
- “If you have a true differentiated model that stands out from the fray, the appetite is robust and... investors... are throwing out huge offers...”
Dental Market
- Specialization draws capital:
- “Pediatrics and orthodontics are still very, very hot. Especially that combination... as is oral surgery.”
(Castelli, 10:19)
- “Pediatrics and orthodontics are still very, very hot. Especially that combination... as is oral surgery.”
- General dentistry needs uniqueness:
- “It can be general dentistry if the go-to-market strategy is unique; otherwise, be specialty.”
(Castelli, 10:19)
- “It can be general dentistry if the go-to-market strategy is unique; otherwise, be specialty.”
Medicaid Dental Practices
- Wait-and-see approach:
- “I don't see as much heat behind the Medicaid practices we have in the past... there’s a little bit more of a wait and see approach happening...”
(Castelli, 10:57)
- “I don't see as much heat behind the Medicaid practices we have in the past... there’s a little bit more of a wait and see approach happening...”
Healthcare Specialties
- Follow the margins:
- “Orthopedic and cardiology practices are still very profitable... Whereas you look at general medicine, pediatric medicine, obgyn or reimbursement, less profitable, just a little bit less attractive overall.”
(Castelli, 11:52)
- “Orthopedic and cardiology practices are still very profitable... Whereas you look at general medicine, pediatric medicine, obgyn or reimbursement, less profitable, just a little bit less attractive overall.”
- Role of technology:
- “The advent of technology... practice areas where you can take advantage of technology are... still shining relative to... those where it has less impact.”
(Castelli, 12:44)
- “The advent of technology... practice areas where you can take advantage of technology are... still shining relative to... those where it has less impact.”
5. Other Notable Findings from the Survey
- 2025 headwinds:
- “Tariffs are what really stood out as the major headwind last year.”
(Castelli, 13:24)
- “Tariffs are what really stood out as the major headwind last year.”
- Interest rates surprisingly neutral:
- “Interest rates, by and large, were viewed as a neutral factor... respondents didn’t really cite [them] as a major headwind."
(Castelli, 13:10)
- “Interest rates, by and large, were viewed as a neutral factor... respondents didn’t really cite [them] as a major headwind."
- 2026 concerns:
- “Answer number one, by a pretty decent margin, was competition for deals. Answer number three, was rising valuations.”
(Castelli, 13:40) - “If private equity firms are concerned that they're going to have to compete too aggressively and pay too big a price... then I want to throw my hat in the ring...”
(Castelli, 13:54)
- “Answer number one, by a pretty decent margin, was competition for deals. Answer number three, was rising valuations.”
6. Caber Hill’s Organizational Growth and Strategy
- Team growth:
- “We expanded our team in 2025... one of our newer members... has a buy side background... bringing dedicated focus towards a professional buy side offering...”
(Castelli, 15:01)
- “We expanded our team in 2025... one of our newer members... has a buy side background... bringing dedicated focus towards a professional buy side offering...”
- Buy-side services ramp-up:
- Example: “He's helping a PE-backed landscaping business in the Southeast source acquisitions... helping a European manufacturer find a foothold in the US...”
(Castelli, 15:41)
- Example: “He's helping a PE-backed landscaping business in the Southeast source acquisitions... helping a European manufacturer find a foothold in the US...”
- Balanced focus:
- “As our business grows... to offer more robust buy side services that complements the sell side offering that we’ve always had... allows us to... play a larger role in the overall M&A environment.”
(Castelli, 16:24)
- “As our business grows... to offer more robust buy side services that complements the sell side offering that we’ve always had... allows us to... play a larger role in the overall M&A environment.”
Notable Quotes & Timestamps
- On volatility and optimism:
- “We lived three business cycles all within a 12-month period.” (Castelli, 01:59)
- “26 will be the year we thought 25 will be.” (Castelli, 03:41)
- On 2026 outlook:
- “82% of respondents expect 2026 to be a stronger year overall...” (Castelli, 07:23)
- On sector nuances:
- “If you have a true differentiated model... appetite is robust...” (Castelli, 09:25)
- On competitive market:
- “If private equity firms are concerned that they’re going to have to compete too aggressively... I want to throw my hat in the ring...” (Castelli, 13:54)
- On growth and leadership:
- “I like to spend as much of my time... as the leader of the people here and... help them grow and evolve.” (Castelli, 14:56)
Key Timestamps
| Time | Topic | |------------|------------------------------------------------------------------------| | 00:30 | Becker sets context: big fund underperformance, guest intro | | 01:30 | Castelli on 2025's volatility and initial optimism | | 02:37 | Discussion of “Liberation Day” and uncertainty | | 04:35 | Survey respondent breakdown and sector focus | | 07:23 | Bullish survey results for 2026 | | 08:43 | Liquidity in healthcare PE portfolios | | 09:25 | Importance of differentiation, dental market detail | | 11:52 | Higher price specialties vs. generalist medical practices | | 13:08 | 2025 headwinds: tariffs over interest rates | | 13:40 | 2026 challenges: competition and valuations | | 14:42 | Caber Hill’s buy-side initiative and team growth |
Tone & Language
- Analytical, practical, and empirical: both speakers rely on hard numbers, direct experience, and survey data.
- Conversational but candid: “we lived three business cycles,” and “appetite is robust...” are grounded in firsthand observation.
- Action-oriented: advice and outlooks geared toward founders, sellers, and deal professionals.
Takeaways for Listeners
- 2025 was anomalous, with major uncertainties chilling the market, but confidence is high for a robust rebound in 2026.
- Competition and rising valuations will set the tone, especially for attractive (differentiated) businesses.
- Lower middle market and mature “boring” businesses are still sweet spots for PE money.
- Sellers: 2026 may be an opportune window, as dry powder piles up and competition heats.
- Specialized, technology-leveraged, high-margin practices in healthcare remain deeply attractive; undifferentiated models face headwinds.
Compiled and structured for clarity by Becker Business Podcast Summaries. All content attributed to Scott Becker and Craig Castelli as per transcript.