Bain & Company’s 2024 Global Private Equity Report: Executive Summary
Mar 11, 2024
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Exploring the shifts in private equity deals from 2022 to 2024, with a focus on high pricing due to intense competition and sellers favoring resilient assets. Analyzing challenges in exits, the need for strategic exits to unlock value, and strategies for maximizing EBITDA. Emphasizing operational improvements and innovation in private equity firms for future success.
Private equity deal making saw stability in 2023 despite challenges and a decline in buyouts compared to 2021.
LBO loan issuance dropped significantly in 2023, impacting exit channels and highlighting the need for structured strategies to boost liquidity.
Deep dives
Private Equity Landscape across 2022-2024
The private equity landscape across the years 2022 to 2024 has seen distinct phases. From the capital velocity and deal making euphoria of early 2022 to the period of rapidly rising interest rates, and now transitioning to a seemingly stable environment for deal making. While 2023 witnessed a 60% decline in buyouts compared to the peak year of 2021, with around $438 billion worth of transactions, it was not a historically poor year for deal making. Despite challenges, a substantial number of transactions were completed.
Challenges in Syndicated LBO Loan Issuance
In 2023, syndicated LBO loan issuance dropped by 56% from 2022, even falling below the levels seen in 2012, despite higher deal values. With banks displaying caution and a shift towards growth-centric assets, the capital structure of LBOs has evolved. The market's competitive intensity has kept pricing relatively resilient, with assets up for sale being those perceived as resistant to interest rate hikes, inflation, and recession.
Navigating Exits and Future Prospects
Exits in the private equity sector reduced further than deal volumes in recent years, reaching $345 billion in 2023. Exit channels, including IPO, sponsor-to-sponsor, and sponsor-to-strategic, faced significant challenges due to interest rate changes and economic uncertainties. This pressure on exits has led to negative cash flows for LPs, impacting fundraising and liquidity. Strategies focusing on structured approaches to boosting EBITDA and balance sheet management are crucial for unlocking liquidity and addressing exit hurdles.