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Private Equity - Looking ahead to 2024

The global private equity (PE) market has entered a more measured rhythm in recent quarters, navigating through a fundamentally different landscape than the one familiar over the past 15 years. This report compiles insights from a survey of 100 senior PE executives across Asia, Europe, and the U.S., shedding light on how they are confronting current challenges and positioning themselves for success amidst demanding market conditions and industry transformations.

Key highlights include:

  • Interest Rates and Debt Burdens: 26% of respondents believe that interest rates will exert the most significant impact on the deal environment in the next 12 months. An evident concern is the escalation of debt burdens, with 38% identifying the availability and cost of leverage as among the top two challenges currently confronting the PE industry, especially amid monetary tightening.

  • Take-Private Transactions: In a notable shift from 2022, where only 13% of GPs expressed firm intentions of pursuing take-privates, 94% of respondents now express their likelihood to pursue take-private transactions. Despite the additional regulatory complexity and heightened public scrutiny, fund managers are actively exploring deals in public markets, emphasizing the need for early engagement with professional advisers, particularly in the U.S., where recent Delaware court decisions have seen stockholder-plaintiffs securing significant damages awards against acquirers in take-privates.

  • GP-Stake Divestitures: A significant 59% of respondents plan to make GP-stake divestitures in the next 24 months. This strategy, driven primarily by the pursuit of liquidity and growth, is expected to be most popular among North American PE firms (64%), followed by 57% in EMEA and 50% in APAC. GPs are viewing this option as a means to raise capital and leverage potential expertise, strategic guidance, and access to valuable networks.

  • Private Credit Usage: An overwhelming 78% of respondents are already utilizing private credit for acquisition financing at the portfolio level. The 2023 U.S. regional bank crisis has amplified the trend towards private credit as a global financing option. Multi-strategy asset managers are taking note, with 73% of those without a private credit financing strategy considering its addition. Beyond acquisitions, GPs are recognizing the versatility of private credit for fund-level financing, enhancing capital efficiency, and expediting new acquisitions.

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