As the investment environment stabilizes and investors become more optimistic about the steady recovery in M&A transactions in 2024, we expect the outlook for global private markets to be generally positive in 2024. Due to a combination of macroeconomic, geopolitical and other factors, trading activity has been volatile in recent years. In 2021, M&A deal volume and deal value both hit new highs, followed by a sharp decline to their lowest level in a decade between 2022 and 2023. In 2023, inflation has led to a decline in corporate operating profits, while rising interest rates have made it difficult for investors to achieve satisfactory returns, and private equity (PE) investment has slowed sharply. In addition, uncertainty about future costs of capital makes it difficult to price deals. PE investors are finding that new leveraged buyout financing faces more challenges as traditional lenders are dealing with a range of challenges themselves.
At the start of 2024, with inflation easing, interest rate expectations lowered, and the recent uptick, we believe the bell is ringing for a recovery in M&A activity. This is good news for private bond capital, which has a record amount of investable funds, but at the same time, general partners (GPs) are under increasing pressure from limited partners (LPs) to invest and distribute. Private capital has reached $12 trillion in assets under management (AUM), nearly doubling from 2019. This shows that the unrealized profits of private equity have accumulated significantly, and it also indicates that many investments need to be withdrawn and liquidated. We expect to see a lot of assets for sale in the market over the next 12 months.
*: PricewaterhouseCoopers.
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