BrazilDealmaking rebound sees private equity recovery taking shape amidst uncertainties
The global private equity market is set to continue its rebound this year, but lingering economic uncertainty and sluggish fund-raising may put a brake on that growth, meaning a full-blown recovery is not the most likely scenario. That is according to new research from Bain & Company, a global strategy consultancy firm.
In the twelve months of 2024, both private equity investments and exits reversed their declines, reflecting an improved macroeconomic environment and a strong desire among funds to get deals done.
Total buyout investment value rose by 37% year-on-year to $602 billion in 2024 (excluding add-on deals), also driven by the sector’s desire (and pressure) to put aging dry powder to work. The trend was further fuelled by lower interest rates, which makes buying more attractive for private equity funds as they typically use debt to finance their acquisitions.
Global exit value jumped 34% year-on-year to $468 billion, while exit count climbed 22% to 1,470. As a result, the backlog of unsold companies dropped to 29,000 worldwide, said Bain & Company.
Total fund-raising however bucked the upward trend. Buyout funds raised 23% less capital globally than they did in the year previous.
That slowdown wasn’t surprising, noted the authors. “Fund-raising is a lagging indicator that responds to industry cash flows. The heavy drawdowns of capital to feed the dealmaking beast in 2021 were followed by an abrupt skid in exit activity when interest rates spiked and dealmaking slumped. The resulting slowdown in distributions caused private equity funds to cut back on new allocations.”
The outlook for 2025
Despite the positive signs, Bain & Company – which is one of the leading strategy and M&A advisors to financial investors – emphasized that it is too early and uncertain to predict a clear-cut path for 2025.
“Whether the renewed impetus in 2024 can build will depend on how policy unfolds,” said Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company. “We think the headwinds that have held back activity since mid-2022 should continue to dissipate. The industry is anxious to make deals, general practitioners are finding creative ways to boost liquidity, more dollars should flow in from sovereign wealth funds and private wealth and, returns remain strong.”
“But deal appetite is still tempered by the uncertainties keeping markets on edge. While challenges such as inflation trends, interest rates, trade policy, and geopolitical factors remain, the industry has demonstrated resilience and adaptability and is well-positioned to grow as conditions evolve.”
The Middle East
In the Middle East, deal activity by financial investors is driven heavily by sovereign wealth funds, with a previous Bain & Company report finding that sovereign funds account for 86% of deal value in region.
Gregory Garnier, Middle East head of the Private Equity practice at Bain & Company, commented on the outlook: “The Middle East is entering a dynamic period of growth and transformation, creating unprecedented opportunities for investors. As economies diversify and sectors such as technology, renewable energy, and infrastructure gain momentum, private equity firms have a unique chance to drive meaningful value.”
“The most successful funds will be those that take a forward-thinking approach, leveraging regional expertise, strategic partnerships, and innovative value-creation models. By setting a clear vision and building a sustainable, long-term growth strategy, investors can position themselves at the forefront of this exciting new era.”
