As 2024 winds down, U.S. private equity has experienced an eventful year marked by large transactions, strategic take-privates, and shifting market dynamics. Despite the challenges of high inflation, volatile markets, and rising interest rates, private equity firms have made substantial moves, adapting to the conditions while positioning themselves for the future.
Here’s a recap of the most significant trends shaping U.S. private equity as we enter the final quarter of the year.
Table of Contents
Deal Activity: Fewer, But Bigger
While the total number of private equity deals has dropped by 4% year-to-date, deal value is up 10%, driven by larger, higher-value transactions. In August alone, deal values hit their highest point in 12 months, despite deal counts falling by 22%. This trend reflects a shift toward fewer but larger deals, as firms are focusing their capital on more substantial targets.
Notably, deals over $500 million made up nearly half of all transactions in 2024, compared to just 28% in 2019. With a surplus of dry powder—around $1.2 trillion waiting to be deployed—private equity firms are increasingly leaning into these big-ticket acquisitions, betting that size will bring higher returns, even as economic uncertainties loom.
Take-Private Deals Gain Momentum
One of the most notable developments this year has been the resurgence of take-private deals. In 2024, we’ve seen 27 public companies taken private by private equity firms—a clear signal that firms see value in pulling companies out of the public eye to drive growth and strategic shifts.
Take-private deals have surged because many public companies, pressured by quarterly earnings and investor demands, are struggling to fully unlock their value. Private equity firms offer an alternative, allowing management teams to restructure or realign businesses without the pressure of public markets. For many firms, these deals represent a prime opportunity to revitalize undervalued assets or execute long-term strategies without the constraints of short-term market expectations.
Cross-Border Investments Rise
The U.S. continues to attract international capital, with cross-border investments in U.S. companies on the rise. Despite ongoing geopolitical tensions, private equity investors from Europe and Asia are still keen on acquiring U.S.-based assets. The U.K. and Germany have been the most active European players, accounting for 41% and 15% of deals, respectively.
Foreign investors see the U.S. as a stable and promising market, particularly in sectors like technology, healthcare, and financial services. With the dollar remaining strong and growth opportunities prevalent, cross-border activity is expected to continue through the rest of the year.
Fundraising Struggles, But Mega Funds Thrive
Fundraising in the U.S. private equity market remains a challenge in 2024, with fewer funds closing and capital flows concentrating around established players. On average, it now takes 29 months to raise a private equity fund, up from 19 months in 2023, and smaller firms are finding it particularly difficult to attract investors in the current environment.
Mega funds—those closing with $1 billion or more—are still seeing robust fundraising, but mid-sized and smaller funds face stiff competition and longer timelines. As investor sentiment has become more cautious, they are flocking to larger, more established firms with proven track records. This has concentrated capital among a handful of big players, while many smaller firms are struggling to meet their fundraising targets.
Leveraged Loan Market Shows Signs of Life
After a slowdown earlier in the year, leveraged loan issuance picked up in July, hitting $151 billion, up 31% month-over-month. Despite a volatile start to the year, optimism around future interest rate cuts has brought some relief to the leveraged loan market, which private equity firms rely on to fund acquisitions.
Banks have also become more competitive, looking to regain market share from private lenders. As we move closer to potential rate cuts from the Federal Reserve, many expect loan issuance to continue increasing, fueling more private equity-backed deals in the months ahead.
Exits and IPOs Remain Tricky
Exits have been a challenge for private equity firms in 2024, with many delaying initial public offerings (IPOs) due to market volatility. Although the broader market has stabilized somewhat, many private equity-backed companies have postponed IPOs, hoping for more favorable conditions in 2025.
Instead, firms are exploring alternative liquidity strategies, such as continuation funds, NAV loans, and partial sales, to return capital to limited partners. For now, most firms are holding off on major exits, waiting for a clearer economic outlook before pushing portfolio companies into public markets.
Sports: The New Frontier for Private Equity
One of the hottest sectors for private equity this year has been sports. The decision by the NFL to allow private equity firms to invest in franchises opened a major new avenue for institutional investors, marking a significant shift in the way the industry views professional sports as an asset class.
Private equity firms have been pouring capital into everything from professional sports leagues to youth and amateur athletics, seeing long-term growth potential in media rights, sponsorship, and fan engagement. The NFL’s move is part of a larger trend where private equity is increasingly interested in sports as a stable, growing market with attractive demand drivers.
Looking Ahead: Preparing for a Rebound
As 2024 comes to a close, private equity firms are gearing up for what could be a strong year-end push. The Federal Reserve has already cut the interest rates in mid-September, and this could spur a wave of dealmaking in the final quarter of the year. Lower rates would reduce borrowing costs, making it easier for firms to finance large acquisitions.
While uncertainty remains, particularly around inflation and global political risks, there is cautious optimism in the private equity world. Firms are positioning themselves to take advantage of lower rates and improving market conditions. If these factors align, 2025 could see a rebound in both deal activity and exits.
Conclusion
Overall, 2024 has been a year defined by big deals, strategic take-privates, and the challenges of fundraising in a tighter capital environment. As the industry looks toward year-end and beyond, private equity is poised to make even bigger moves, with rate cuts and a potential market rebound on the horizon.
References
- https://www.ey.com/en_in/industries/private-equity/pe-vc-monthly-roundup
- https://www.ropesgray.com/en/insights/alerts/2024/09/us-pe-market-recap
- https://www.lexology.com/library/detail.aspx?g=5059c6d5-c505-4999-9e64-91d27483fb8e
- https://www.mondaq.com/unitedstates/maprivate-equity/1519434/us-private-equity-market-recap-september-2024