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Both European and US private equity dealmaking have shown steady, incremental year-on-year gains over the first nine months of 2024.
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Global private equity deal count for the first nine months of 2024 climbed 8% on activity levels in 2023, while deal value was up by a fifth when compared to the same period last year, according to Pitchbook figures.¹
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Deal activity remains well shy of the levels observed at the peak of the market in 2021. However, after back-to-back years of declining deployment, the green shoots that have emerged so far in 2024 are promising and may provide dealmakers some relief.²
Global private equity exits have also moved in the right direction over the period. Value and volume have ticked 13% and 3% higher, respectively, on the levels observed across the first nine months of 2023.³
Jammed up exit markets have had a direct impact on the ability of managers to fundraise, with the lack of portfolio company sales limiting distributions back to investors. In turn, this has constrained the capacity of LPs to recycle proceeds back into the next vintage of funds.
Meanwhile, geopolitical tension, conflicts and the US presidential election continue to cloud the horizon, but cooling inflation and lower interest rates are giving private equity dealmakers and fundraisers cause for cautious optimism that the gradual recovery in new deals and exits observed so far in 2024 will continue to gather momentum.
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.
The improvement in new deal activity has been especially prominent in Europe. Deal value and deal count are pacing for year-over-year growth of 28% and 12%, respectively, putting the region ahead of the global average.⁴
With both the Bank of England⁵ and European Central Bank⁶ reducing interest rates through the course of the year, it has been easier for dealmakers on the buyside to price risk. This confidence, coupled with cooling deal multiples,⁷ has helped to narrow the delta between buyer and seller pricing expectations and provide more fertile ground for deal activity.
The appetite for megadeals is also slowly returning as the underlying macroeconomic fundamentals improve, with sponsors actively pursuing large corporate carve-outs, take privates and secondary buyouts.
The news of two jumbo deals in August — Clayton Dubilier & Rice’s €16 billion bid for the consumer division of French pharmaceutical group Sanofi⁸ and the £5.4 billion take-private of retail investment platform Hargreaves Lansdown by a PE consortium⁹ — have indeed given the European market a confidence boost.
Preqin figures have shown that by the beginning of September European buyout managers had already closed 80 buyout funds — the same as the number of vehicles raised in the whole of 2023.¹⁰
The missing piece in the puzzle for the European market has been exits. Sponsor portfolio company sales have been slow to rally and exit value is pacing to finish 2024 in line with what was a soft year in 2023. Exit value is still lagging the peak of the market in 2021 by more than a third, and sponsors will be looking to IPO markets to reopen in earnest, and for corporates to return decisively to M&A.
Interestingly, fundraising in Europe has proven remarkably resilient, particularly given the context of a tepid exit market in the region. European funds have raised €110 billion during the first nine months of the year, according to Pitchbook¹¹, a figure that compares well with historical averages and shows that LPs have confidence in European managers to deliver sustainable long-term returns.
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The recovery in US deal activity has steadily gathered momentum through the course of the year. By the end Q3 2024 deal value was up 23% on the same period last year, while deal count improved 13%.¹²
This puts the US market on track to achieve $864 billion by the end of the year, and end a 24-month dealmaking slump that saw a drop of 43% from peak of the cycle to the bottom of the market.¹³
Exit activity has also improved, though it remains concentrated in fewer transactions, with private equity sellers prioritising their highest-quality assets to secure favourable outcomes. In the first nine months of 2024, exit value surged 51% compared to Q3 2023. This puts it on track to reach its highest level since 2018, excluding the exceptional boom years of 2020 and 2021, according to Pitchbook.¹⁴
Exit market nevertheless remains choppy which has partially shaped US fundraising. For the first nine months PE funds amassed $237 billion, which is in line with 2023 levels. However, the number of large funds — typically at least $10 billion — still fundraising at this point of the year has fallen to just five cases, compared to nine last year. Pitchbook analysis indicates that activity is likely to taper off through the rest of the year.¹⁵
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As we move into the final stretch of 2024, investors and dealmakers have reasons to remain cautiously optimistic. However, global private markets are a broad church, and it pays to look behind the headline to uncover how different sectors and strategies are performing. Here are our seven observations.
US dealmakers eagerly holding on for exit routes to reopen will have been encouraged by the growing list of recent successful exits via IPOs.
While PE-backed IPOs in 2023 totalled only $9 billion — some distance behind the $296 billion seen at the peak of the market in 2023¹⁶ — these numbers have been much better this year, with IPOs recording $26 billion.
Encouragingly, share price performance post IPO has held up well,¹⁷ laying the ground for other sponsors to follow suit in the months ahead as public markets offer strong investor appetite and attractive valuations for vendors.
European sponsors, by contrast, have been less fortunate. Even though the STOXX Europe 600 has touched record highs, private equity IPO exits have been limited.
After a bright start to the year with a cluster of IPOs, including CVC’s listings of Galderma and Douglas, activity has petered out through the rest of the year. Pitchbook figures show only two exits via IPO in Europe in Q3 2024. Uninspiring post-listing performance hasn’t helped to build momentum either.
The private debt asset class has proven resilient through the recent period of interest rate dislocation, with senior debt strategies proving particularly attractive.
The floating rate structures of senior debt loans have benefitted from rising base rates, helping the strategy to post average returns close to 12% between 2018 to 2023, according to S&P data.¹⁸
The impressive risk-adjusted returns offered by senior debt has boosted overall private debt fundraising. Private Debt Investors figures have put private debt fundraising for the first three quarters at $191 billion, in-line with 2023 levels.¹⁹
Senior debt accounted for 62% of the total funds raised — up from an average share of around 40% over the last five years.²⁰
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The growth equity space was one of the hardest hit private markets segments. As interest rates started to climb and investors and dealmakers went on the defensive, stepping back from deals involving companies that are growing fast but are not profitable.
The growth equity market, however, has gone from strength to strength as the interest rate cycle has peaked and dealmakers have had the confidence to take on more risk in order to deliver outsized returns.
According to Pitchbook, growth equity deal value in the US is up 33% over the first nine months of 2024, as sponsors proceed with investments in fast growing companies.²¹
Bridgepoint, for example, has reinvested in a Kyriba, a technology platform used by finance and treasury teams to manage liquidity, bringing in General Atlantic as a minority investor in deal valuing the company at $3 billion.²²
As the primary source of liquidity in an illiquid market, the last 24 months have seen significant deal flow for secondaries. These funds have been in high demand, with investors seeking liquidity due to a lack of distributions.
Fundraising for these vehicles is on track to match 2023’s all-time high for the strategy, with $77 billion raised by the end of third quarter, according to Secondaries Investor.²³
Fundraising highlights have included HarbourVest closing a $15 billion secondaries fund in Q3 2024,²⁴ while Hamilton Lane closed a $5.6 billion vehicle earlier in the year.²⁵
Despite some of the hype around AI investing dissipating, investment in AI has become a fixture in the technology and venture capital landscape.
Investment in AI surpassed the VC inflows into the next busiest sectors — biotech and hardware — with AI startups securing investment of close to $19 billion in Q3 2024 to account for 28% of total venture capital investment in the quarter, according to Crunchbase data.²⁶
The rise and rise of AI hasn’t been the only good news story in the venture space. Valuations across the entire venture asset class have found firmer footing in 2024 as lower interest rates and a relatively soft landing for economies have helped to stabilise asset prices for early-stage companies.
According to Schroders analysis of Pitchbook data, global median pre-money valuations for venture assets have settled after steep declines early in 2022 followed by choppy lurches up and down through 2023.²⁷
Valuations still lag the peaks achieved in 2021, but have now recovered to move above 2019 thresholds, putting venture investing on a potentially sounder foundation moving in 2025.
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