从停滞的一年到抛售的一年，私募股权在2024年重新焕发生机

all other activity was put on hold. A scarcity value applied tothose type of assets, which were few and far between andattracted a lot of eyeballs given the lack of activity. The majorityof PE investors sat on the sidelines, not making new portfoliocompany investments and not selling any of their portfoliocompanies, which means they were not returning any capital totheir limited partners (LPs). Stagnancy has consequences. The dry powder as well as theportfolios of many PE firms have continued to age, dialing up thepressure as time keeps ticking by. Bain reports record amountsof dry powder four years or older, and nearly half (46%) of PEportfolio companies having been held for four or more years,the highest level since 2012. These companies are approachingdebt maturities that occur at the five- or six-year mark, meaningPE firms will need to take some kind of imminent action toaddress their longer-tenured holdings. By: Scott AmesManaging Director, Head of Financial Sponsors Group Private equity (PE) continued its holding pattern in 2023 followinga challenging 2022. Against the backdrop of swiftly rising interestrates—with the Federal Reserve increasing rates 525 basispoints from March 2022 to July 2023—we continued to seesharp declines in fundraising, deployments, and realizations. AsBain & Company cites in itsGlobal Private Equity Report 2024, lastyear deal value dropped by 37%, exit value fell by 44%, and 38%fewer buyout funds closed. It was feast or famine, with only 20funds raising more than half of all buyout capital. Stagnancy has consequences. The drypowder as well as the portfolios of manyPE firms have continued to age, dialingup the pressure as time keeps ticking by. In 2023, the only deals that transacted in PE were the highest-quality companies that still garnered premium multiples, while Bain & Company reports record amounts of dry powder four years or older Regardless of the timing of rate cuts, the confluence of allthe above factors—aging portfolios, aging dry powder, andincreasing LP pressure—will be extremely powerful drivers ofPE market activity this year. We expect the floodgates will openback up for PE-backed deals in the back half of 2024, bringingin the bid-ask spread between buyers and sellers to drive a lotmore activity. PE firms on the shot clock todeploy capital The stalled activity that continued in 2023 has created a forcingfunction that will define the PE landscape in 2024—and joltit back to life. On the back of raising record amounts of drypowder in recent years, PE firms are under increasing pressureto return capital to LPs, who in some cases are now cash flownegative, as many rely on those distributions to plow back intofuture fundraising. LPs who have not received any monetizationfor a prolonged period are now forcing the hand of PE funds,implying they will not commit to an upcoming fundraise if theydo not receive any distributions that they can recycle, therebycompromising PE firms’ future capital raises. We expect the floodgates will open backup for PE-backed deals in the back halfof 2024, bringing in the bid-ask spreadbetween buyers and sellers to drive a lotmore activity. Depending on the timing, the Fed beginning to cut interestrates—a critical decision-making input for funds that deploycapital—could be another spurring activity this year. PEfunds act largely based on how much leverage they can get,determined by the cost of capital available—which is directlyconnected to the rate environment. The steep rise in interestrates leading to the high cost of capital has limited the amountof leverage they can put on a business. The promise of rate cutsnow dances on the horizon, with lots of speculation about whenthe first cut will happen given recent data showing inflation isstill running significantly higher than the Fed's 2% target. In hot pursuit of value creation Going forward, PE firms cannot just rely on multiple expansion.Given how depressed valuations have been over the lasttwo years—thanks in part to the interest rate environmentlimiting the leverage buyers could put on a business—they will need to think harder about value creation opportunitiesand growth levers they can pull within companies throughoutthe hold period. That includes laser-focusing on operationalplaybooks to drive margin expansion or pursuing buy-and-buildopportunities in fragmented industries, which involves acquiringmultiple add-ons to a platform throughout the hold period.hard for private markets to outperform other assetclasses, right? Or do they?Let’s start by addressing private markets fund fees.Private market managers charge a managementfee, which varies over the course of the fund’s From an LP’s perspective, while the return profile of PE hascome down from its highs in 2021 before the Fed started itsextended period of rate hike, if you look at a 10-year average, itis still out-performing major indexes and continues to be a focusfor fund managers looking to diversify.to as a performan