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Private equity deal values seem to be rebounding in the past few months, fundraising remains robust and secondaries have entered what could be a golden age. How did PE perform in the first half of 2024, and what can we expect for the rest of the year?
Since we have now crossed the midpoint of 2024, it’s an opportune moment to take stock of what’s happening in the private equity market. We have digested recent dealmaking, fundraising and exits data and found potential signs of a gradual recovery in some areas and notable resilience in others.
The anticipated rebound in dealmaking has yet to fully materialise as the private equity market remains in a state of cautious recovery. Global PE deal value for the first half of the year reached $620.6 billion, representing an 8.5% decrease compared to the same period in 2023. Deal volume saw a more significant decline, with around seven thousand transactions recorded in H1, down 18.3% year on year. However, these figures mask a notable improvement in the second quarter following a sluggish start to the year.¹
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The second quarter saw larger deals helping to buoy global deal value, which rose 7.9% quarter-over-quarter to $322 billion, even as volume slipped by 11.6% to 3,286 transactions. This value lift was even more pronounced in Europe, where new deals totalled €107 billion in Q2, up 27.3% from the previous quarter.²
Activity is still muted compared to the dizzying highs of recent years, but the 2021-2022 period makes for a somewhat unfair benchmark. That window saw unparalleled levels of activity fuelled by rock-bottom interest rates and massive stimulus measures.
When compared to the more "normal" averages of 2017-2020, current deal values are remarkably similar. Our analysis shows that on a 10-year trailing quarterly average, global deal value was $319 billion.³ Simply put, things are back at baseline from a value perspective even though volume has continued to trend down. One explanation for this value/volume divergence boils down to the still high cost of capital that PE buyers face, making sellers more inclined to shop their highest-quality assets. These are more likely to attract high bids and close at premium valuations, resulting in fewer but larger transactions.
Each month, you’ll receive the most important private market insights and Moonfare updates – straight to your inbox.
Each month, you’ll receive the most important private market insights and Moonfare updates – straight to your inbox.
Each month, you’ll receive the most important private market insights and Moonfare updates – straight to your inbox.
Global PE fundraising for the first half of 2024 reached $293 billion across 243 funds. If this pace continues, the annualised total for this year will be on par with 2022's impressive $586 billion. This resilience is particularly noteworthy given the relatively sluggish exit market PE managers have been contending with.⁴
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Europe, in particular, has shown exceptional strength. European fundraising is tracking 42% higher than 2023 levels, defying expectations of a slowdown.⁵ However, this robust performance comes with a significant caveat — the concentration of capital in a small number of mega funds.
This can be seen in the fact that 61% of the capital raised in the region so far in 2024 has come from just three funds. The largest of these was EQT Fund X, which raised an impressive €22 billion.⁶ Following closely behind was the Eighth Cinven Fund, which secured €13 billion⁷ and rounding out the top three was Apax Fund XI, which amassed €11 billion.⁸
This concentration trend is not unique to 2024. In 2023, the top three funds contributed 39% of total European PE fundraising. The increasing dominance of established managers with strong track records reflects a flight to quality among cash-constrained limited partners. Improving exit conditions should see capital recycled back to LPs, potentially fuelling new commitments.
All eyes are trained on exits right now. In the first half of 2024, global divestment value reached $309.6 billion across 1,130 transactions. This represents a 10.5% decrease in value and a 29.6% drop in volume compared to H1 2023.⁹
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However, a closer look at the figures reveals a more encouraging quarter-on-quarter trend. Global exit value saw an increase in Q2, rising 26% to reach $172 billion. The rebound was driven by larger sales, as volume fell by 11% on the previous quarter to 531.¹⁰ Once more, Europe has been making an impression. The region saw exit value surge by 90% in Q2 to €72.8 billion.¹¹
The jump in value may signify the green shoots of a sustained recovery. One promising development is the return of PE-backed initial public offerings (IPOs), which raised $15 billion so far this year, more than doubling the total raised in the 2023’s first half.¹²
Investors have been rewarded for participating in public offerings, with IPO returns considerably outpaced benchmark indices. In the US, the YTD IPO return of 24% is ahead of the 15% on the S&P 500, while in Europe IPOs are up 18% compared with 7% for the STOXX Europe 600.¹³
As we move into the second half of 2024, the PE exit market appears poised for continued recovery. The combination of relatively stable economic conditions in the US and Europe, strong performance of recent listings and a backlog of mature portfolio companies suggests that we may see sustained momentum in exits.
This would provide much-needed liquidity and potentially fuel the next cycle of fundraising and investments.
With exits being concentrated around larger deals, investors are finding liquidity by other means. The private equity secondary market is in full swing right now, driven by improved pricing levels and a growing demand for liquidity. The estimated deal volumes surpassed $72 billion in the first six months of the year, the best halftime result for the industry ever, according to Evercore’s report.¹⁴ This is a substantial increase compared to last year’s H1, which saw the total transaction value reach $42 billion. The report also notes that second halves of the year are typically even more active which means 2024 is likely going to surpass record 2022 volumes.
The narrowing bid-ask spread has played a crucial role in driving activity, motivating sellers to transact which should keep deals flowing. According to Evercore, pricing increased for buyout, credit, venture and growth stakes.¹⁵
Fundraising for secondaries funds is equally strong. There was $189 billion of dry powder available at the mid-year mark, up around 14% compared to the beginning of the year.¹⁶ A number of funds held successful closings in this period, include Lexington Partners which secured $22.7 billion in January for the largest secondaries fund ever raised¹⁷, while StepStone Group amassed $3.3 billion in June for the biggest VC secondaries fund in history.¹⁸
Our research details the forces and trends shaping secondaries.
Our research details the forces and trends shaping secondaries.
Our research details the forces and trends shaping secondaries.
The outlook for venture capital investment in AI, particularly generative AI, appears robust for 2024 and beyond. Despite a general slowdown in other sectors, AI continues to attract significant funding.
In Q1 2024, global VC investment in generative AI reached $3 billion, with projections suggesting a total of $12 billion for the year. This represents a substantial increase from previous years, excluding major Big Tech investments into OpenAI, Anthropic and Inflection made by Microsoft and Amazon.¹⁹
Focus is shifting from horizontal AI (general-purpose models) to vertical AI (industry-specific applications). This transition is expected to drive an increase in both deal numbers and investment volume. While North America currently leads in AI funding, Europe is showing potential. A notable example is Mistral in France, which has achieved unicorn status and is challenging major US AI companies.²⁰
There's a significant opportunity to capitalise on the AI trend in Europe by leveraging the EU's regulatory approach as a potential advantage. This initiative aims to create a harmonised system for AI governance, ensuring ethical and secure development while promoting transparency, accountability and fairness. The establishment of European headquarters by key AI players in Ireland, such as OpenAI Dublin,²¹ is a positive sign for the region's AI ecosystem.
However, as the market matures, investors are becoming more discerning, dialling in on companies capable of demonstrating practical applications and tangible benefits that can deliver sustainable business models, not just hype.
The industry has been in a holding pattern for some time, primarily constrained by a slower exit environment.
Asset valuations have marched higher, with the MSCI World Index rising 12% in H1²² and GPs marking up their fund NAVs. However, these paper gains haven't all translated to actual returns for LPs, potentially creating a mismatch between reported performance and available capital for new fund commitments.²³
The natural buyers of many of these assets — other PE funds — still face a high cost of capital, resulting in a price dislocation between buyers and sellers.
The PE market building on Q2’s promising momentum hinges on a continued rebound in exits. This should follow the normalisation of interest rates, a process that has already begun in Europe with the European Central Bank’s June rate cut.
Less expensive deal financing should stimulate sponsor-to-sponsor activity, returning cash to LPs for new fund commitments. The recent uptrend in PE-backed IPOs is an encouraging development that points to further improvement in liquidity conditions for investors. With six months to go before 2024 draws to a close, these are good reasons to remain cautiously optimistic.
Important notice: This content is for informational purposes only. Moonfare does not provide investment advice. You should not construe any information or other material provided as legal, tax, investment, financial, or other advice. If you are unsure about anything, you should seek financial advice from an authorised advisor. Past performance is not a reliable guide to future returns. Don’t invest unless you’re prepared to lose all the money you invest. Private equity is a high-risk investment and you are unlikely to be protected if something goes wrong. Subject to eligibility. Please see https://www.moonfare.com/disclaimers.
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