Is private equity slowing down? (2024)

Is private equity slowing down?

With M&A activity continuing its lower volumes globally and the IPO markets slow, although slightly thawing, sponsors saw diminished exit opportunities in 2023. Global private equity exits shrank in value from approximately $783 billion in 2022 to approximately $574 billion in 2023, down more than 25%.

Is private equity on the decline?

12.5x EV / EBITDA in 2022)¹. Private equity exits were even more impacted in 2023. Private equity aggregate exit value of $234.1 billion in 2023 was down 23.5 percent from $306.0 billion in 2022, and down 72.0 percent from $836.1 billion in 2021¹.

What is the outlook for private equity?

The volume of private equity deals is poised to grow in 2024, along with an increased focus on AI to drive long-term value creation, according to the Franklin Templeton Global Private Equity team.

Is private equity doing well right now?

The year closed on a strong note, with firms announcing deals valued at US$124b, making it the most active quarter of the year by value. PE remained resilient in 2023, as firms opportunistically deployed capital across a range of verticals, asset classes, and transaction types.

What is the forecast for private equity?

Due to current market dynamics, we expect a continued drop-off in platform deals in H1 2024. Fewer than a quarter of those we surveyed in the US expect M&A activity to involve new platform deals. Private equity has increasingly used buy and build strategies to facilitate value creation where organic growth is subdued.

Does private equity do well in a recession?

Private equity can be a very well-performing asset class during a recession. By understanding the risks and opportunities and having the right processes and technologies in place, your firm can punch above its weight and deliver high-quality returns to its LPs.

Is the private equity boom over?

“After decades of triumphalist money making”, the private-equity industry “faces a reckoning”, says John Plender in the Financial Times.

What is the outlook for private equity in 2024?

Global dry powder across private asset classes has been stacking up for almost a decade and set another record in 2023. The potential for easing rates and the need to put money to work are why we believe investments may improve incrementally in 2024 (unless, of course, the macro environment takes a turn for the worse).

What is the PE market outlook for 2024?

While by all accounts the industry has adjusted to this new normal, there are signs that the clouds are parting. Interest rates have peaked, inflation has receded, the “soft landing” seems to have been achieved, and there is increasing expectation that 2024 will see more robust M&A markets.

Is private equity a stressful career?

but nowhere near as much as in management consulting. While the travel will be less, the work in private equity is very stressful and demanding, so the hours you actually spend working may be more stressful or mentally demanding.

What are the headwinds for private equity?

Private equity funds faced several challenges going into 2024. But headwinds from high interest rates, lower transaction activity, and a record USD 2.6tr in dry powder may fade.

Why not to go into private equity?

Private equity funds are illiquid and are risky because of their high use of debt; furthermore, once investors have turned their money over to the fund, they have no say in how it's managed. In compensation for these terms, investors should expect a high rate of return.

Is private equity at risk?

Risk of loss: Overall, private equity investments involve a high degree of risk and may result in partial or total loss of capital.

Is private equity industry growing?

Private equity has grown rapidly over the past 10 years and the current slowdown in deal activity, albeit brief, offers firms an excellent opportunity to leverage new technology – highlighted by AI and GenAI – and to deploy other operational efficiencies that will drive value creation and transformation in their ...

How fast is private equity growing?

According to the report, the global private equity market size was valued at $445.4 billion in 2022 and is projected to reach $1,098.74 billion by 2032, growing at a CAGR of 9.7% from 2023 to 2032.

What is the safest investment in a recession?

Cash and Cash Equivalents

Cash equivalents include short-term, highly liquid assets with minimal risk, such as Treasury bills, money market funds and certificates of deposit. Money market funds and high-yield savings are also places to salt away cash in a downturn.

What is the best asset to hold during a recession?

Cash, large-cap stocks and gold can be good investments during a recession. Stocks that tend to fluctuate with the economy and cryptocurrencies can be unstable during a recession.

Why invest in PE now?

In private equity, the current landscape allows for acquiring undervalued assets, leveraging distressed situations, realizing substantial returns through active management and potentially securing higher exit multiples through value creation.

Will market bounce back in 2024?

Third, many Wall Street analysts predict that the S&P 500 will jump in 2024, but with a lower return than last year. Sure, they're guessing, just as I am. However, they think that moderating inflation and the potential for interest rate cuts should be good for stocks.

Will stocks rebound in 2024?

There are signs that a rebound in IPO volume is in the cards for this year, with interest rates peaking and stock markets around the world rallying during the early months of 2024.

Will 2024 be good for stocks?

Analysts project 11.5% earnings growth and 5.5% revenue growth for S&P 500 companies in 2024. Fortunately, analysts see positive earnings and revenue growth for all eleven market sectors this year.

Is private equity harder than banking?

Both careers demand exceptionally long hours, with investment banking often requiring analysts and associates to work 80 hours a week or more. Private equity generally offers a better work/life balance, but long hours may be required, particularly during the execution phase of a deal.

Are people in private equity smart?

Private Equity Career Training

PE firms are small, tight-knit, and full of extremely smart and highly motivated people.

What is the 8 20 rule in private equity?

It's standard for firms to charge 20% on this return and to require a certain hurdle rate first. For example, if the hurdle rate is 8%, then the fund would need to earn an 8% IRR before it could earn 20% of the profits.

What is the 2 20 rule in private equity?

"Two" means 2% of assets under management (AUM), and refers to the annual management fee charged by the hedge fund for managing assets. "Twenty" refers to the standard performance or incentive fee of 20% of profits made by the fund above a certain predefined benchmark.