TowerBrook is “extremely bullish” on opportunities in the foreseeable future despite elevated leverage and AI-driven disruption weighing on wider industry returns, Joseph Knoll, managing director, told PE Hub.
Knoll, who also leads the firm’s financial services sector team and co-leads the business services sector team in Europe, spoke to PE Hub about the firm’s strategy in Europe and North America, the main challenges and highlights of H1 and his outlook for exits.
TowerBrook’s recent deals include the acquisition of French sports platform ID Unlimited, as well as the acquisition of MSA Mizar from Columna Capital.
What is your outlook for H2 and how does your strategy differ between Europe and North America?
We are extremely bullish on the opportunities available for H2 and the foreseeable future. If a firm possesses healthy past fund vintages, deep sector expertise and has the ecosystem to transform businesses, H2 should be a fantastic opportunity to invest.
In the current climate, gravity in the private equity industry is intensifying. Elevated leverage, sector re-rating, AI-driven disruption and software exposure are all weighing on wider industry returns. Rather than changing our strategy, we are doubling down on modern value investing: underwriting alpha at entry through disciplined pricing, thesis-driven sourcing, deep sector expertise and operational transformation.
Today’s investment opportunities span both sides of the Atlantic.
At TowerBrook, we invest where the alpha is, whether in Europe or North America. We have global sector teams that constantly evaluate which region has more alpha and apply the same playbook across two different opportunity sets.
Europe offers lower average multiples, but that said, the ability to buy and grow a business organically or with M&A has more risk. Regulatory and political environments across Europe are certainly more challenging. As a result, we invest where risk-adjusted alpha is greatest, favoring fragmented mid-market, founder and family-owned businesses where relationships matter. Price is not always the sole determinant of winning transactions.
Which subsectors stand out to you in terms of opportunities?
Rather than beginning with sectors, we start with a business model test that is driven by our sector teams. Specifically, we ask whether AI strengthens a company’s economics or risks commoditizing them. We invest in the former, avoiding the latter.
The strongest opportunities continue to be in business, financial and healthcare services where AI meaningfully improves productivity and customer outcomes, alongside our consumer vertical where AI has a great cost-to-serve opportunity.
If a company is not engaging in “a little help” from AI today, the opportunity to do so may be gone tomorrow.
What were your main highlights and challenges during the first half of the year?
The biggest highlight has been that our exit engine continues to work in a market where exits remain challenging. Over the last two years, approximately 79 percent of our exits have been strategic sales, versus 21 percent to financial buyers, and the latest example of this has been our sale of CarTrawler to Expedia.
At a PE industry level though, structural challenges remain. Duration has become an alpha killer. Growth is rarely linear, and beyond five years, companies increasingly face slower growth, greater competitive pressure and AI-driven disruption.
The realization versus valuation gap remains the industry’s defining challenge. The 2025 PE industry DPI ran materially below long-term averages despite relatively resilient public markets, while average exit uplifts have compressed significantly versus the prior decade. As a result, we see firms wanting to hold their assets longer, resulting in muted exits and long, winding roads ahead for holding periods.
Success therefore is increasingly belonging to firms who have previously underwritten prudent cases with multiple paths to value creation while simultaneously providing liquidity solutions for sellers. We believe exit planning starts well before a sale, and we ensure every investment enters the portfolio with a fully developed operational roadmap.
What is your outlook for the exit market?
The exit environment has tightened: the lane still wide open is “must-have” mid-cap assets; “nice-to-have” mid-caps face a slightly tougher time; and large-cap “must-haves” are fragile with IPO uncertainty. That’s precisely why we underwrite the most likely exit path, usually a strategic buyer, before entry.
Expect a market characterized by selective clearing rather than a broad-based recovery. Macroeconomic and geopolitical uncertainty is likely to continue weighing on confidence, financing markets and exit timing through the balance of 2026.
Looking ahead, operational execution, not market beta, will determine exits and returns over the next several years. That means transforming businesses faster than ever before.
Editor’s note: This story is part of PE Hub’s ongoing series of Q&As with PE thought leaders. For more, see: