10 trends that defined private equity markets in 2024...
CRE capital doesn't exist in a vacuum. Traditional private equity competes with real estate for capital but is subject to some of the same gravitational pull as real estate.
Here are 10 trends that defined private equity markets in 2024. How many of these define today's real estate markets?
1. Decline in Deal Activity
Private equity deal values dropped 37% in 2023 to $438 billion, the lowest since 2016. Exit values fell even further, declining 44% year-over-year.
2. Fundraising Contraction
Total private equity fundraising fell 20% in 2023, with fewer funds closing compared to prior years. However, larger, more established funds attracted the majority of capital, with the top 20 buyout funds accounting for over 50% of the capital raised.
3. Dry Powder Accumulation
Global dry powder reached $3.2 trillion, with 26% of buyout dry powder now four years old or older. This growing inventory of unspent capital is creating pressure to deploy funds despite challenging market conditions.
4. Shift in Debt Markets
Private credit gained market share, accounting for 84% of middle-market leveraged buyouts as traditional banks pulled back.
5. Sector Trends
Technology continues to get more of the equity, but traditional industries such as industrial goods gained share as investors sought stability. Growth and venture capital segments continued to decline.
6. Exit Challenges
Exit activity declined sharply, with global buyout-backed exits totaling $345 billion, down 44% from 2022. Corporate buyers, the largest exit channel, reduced activity due to macroeconomic uncertainty. IPO exits showed modest improvement but accounted for only 3% of total exit value, reflecting subdued public market activity. Secondaries fundraising grew 92%, driven by demand for liquidity solutions such as continuation funds.
7. Liquidity Constraints for LPs
Slower distributions and higher drawdowns left many LPs cash flow negative, limiting their ability to allocate fresh capital to private equity.
8. Operational Value Creation
GPs are being pushed to focus on organic growth and operational improvements to drive EBITDA growth, as multiple expansion becomes less viable in the current environment.
9. Buy-and-Build Strategies Expand
Add-on acquisitions and bolt-on strategies increased in importance as a means to drive growth within portfolio companies.
10. Pressure to Innovate
GPs are exploring novel approaches to liquidity and value creation to address rising refinancing needs and exit constraints.
CRE capital doesn't exist in a vacuum. Traditional private equity competes with real estate for capital but is subject to some of the same gravitational pull as real estate.
Here are 10 trends that defined private equity markets in 2024. How many of these define today's real estate markets?
1. Decline in Deal Activity
Private equity deal values dropped 37% in 2023 to $438 billion, the lowest since 2016. Exit values fell even further, declining 44% year-over-year.
2. Fundraising Contraction
Total private equity fundraising fell 20% in 2023, with fewer funds closing compared to prior years. However, larger, more established funds attracted the majority of capital, with the top 20 buyout funds accounting for over 50% of the capital raised.
3. Dry Powder Accumulation
Global dry powder reached $3.2 trillion, with 26% of buyout dry powder now four years old or older. This growing inventory of unspent capital is creating pressure to deploy funds despite challenging market conditions.
4. Shift in Debt Markets
Private credit gained market share, accounting for 84% of middle-market leveraged buyouts as traditional banks pulled back.
5. Sector Trends
Technology continues to get more of the equity, but traditional industries such as industrial goods gained share as investors sought stability. Growth and venture capital segments continued to decline.
6. Exit Challenges
Exit activity declined sharply, with global buyout-backed exits totaling $345 billion, down 44% from 2022. Corporate buyers, the largest exit channel, reduced activity due to macroeconomic uncertainty. IPO exits showed modest improvement but accounted for only 3% of total exit value, reflecting subdued public market activity. Secondaries fundraising grew 92%, driven by demand for liquidity solutions such as continuation funds.
7. Liquidity Constraints for LPs
Slower distributions and higher drawdowns left many LPs cash flow negative, limiting their ability to allocate fresh capital to private equity.
8. Operational Value Creation
GPs are being pushed to focus on organic growth and operational improvements to drive EBITDA growth, as multiple expansion becomes less viable in the current environment.
9. Buy-and-Build Strategies Expand
Add-on acquisitions and bolt-on strategies increased in importance as a means to drive growth within portfolio companies.
10. Pressure to Innovate
GPs are exploring novel approaches to liquidity and value creation to address rising refinancing needs and exit constraints.
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