Private Equity Outlook in 2024

Private Equity Outlook in 2024

The motto for 2024 is to overcome the backlog of previous investments and encourage reinvestment. But how did we get here, and what is the outlook of industry professionals for the upcoming year?


Liquidity and transaction landscape

The Private Equity (PE) world begins 2024 with record amounts of uninvested capital and an unprecedented reserve of aging deals that funds must sell in the coming years.

PE funds held a record $2.59 trillion in cash reserves as of December 15th, according to S&P Global Market. A substantial portion was concentrated among the top 25 entities in the sector, including Apollo Global, Blackstone, KKR, CVC Capital, and Advent International.


Current challenges in Private Equity

Despite this liquidity abundance, the last quarter saw a near-decade low in private equity exit transactions, due to a sluggish initial public offering (IPO) market and a slowdown in global transactions, as reported by Bain & Co.

Funds find themselves with a record $2.8 trillion in unsold investments and a lengthy queue of companies to divest, causing frustration among institutional investors accustomed to a steady liquidity flow.

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Acceleration strategies for 2024 transactions

Hope lies in funds leveraging their cash by finalizing deals to shed old investments, especially with growing optimism about the peak of interest rates in the United States.

To actualize these agreements, many funds have employed financial engineering tactics to narrow the gap between buyer offers and owner expectations.

2024 Perspectives

2024 is envisioned as a potential reset period for accelerating transactions, with numerous pending deals expected in the first half. Experts express hope that this year will finally witness the realization of many long-awaited agreements.

Many professionals are relieved that 2023 is behind us. Despite a challenging year, there are favorable prospects in 2024 that once again make investments in private equity, particularly venture capital, attractive.


Emerging trends in corporate asset divestitures

Financial experts and fund leaders show increasing interest in corporate asset divestiture operations, where a private equity firm acquires a business unit from a large corporation.

In 2023, the largest private equity deal was GTCR's divestiture of payment company Worldpay to FIS, valued at $18 billion. In 2024, many major acquisition firms aim to replicate these significant asset divestiture operations, demonstrating their ability to acquire business divisions with management expertise and substantial reserves, as highlighted by Max Justicz of UBS.

In 2024, Private Equity faces challenges and seeks to accelerate transactions. Well-endowed with liquidity, funds aim to overcome a stagnant market. The anticipated reset could materialize long-awaited deals, boosting activity.