9 Key Predictions in Private Equity for 2024

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The last year of 2023 did not bring much excitement in the PE world. Having disappointed private equity fund managers and portfolio companies, the good news is that PE 2024 looks exciting! As we are gearing up for the new challenges in 2024, the experts have shared their private equity insights like competitive deal flow, ESG focus, rise in LBO, resilience amidst turbulence, and more.

Let us watch out for the trends that may define private equity in 2024.

Top 9 Private Equity Trends in 2024

The PE firms looking forward to value creation can study the following expected trends this year:

✍Renewed Growth

In the past year, PE firms were struggling to achieve growth. The portfolio managers were finding it difficult to create value due to the high-interest rates, surge in the cost of capital, exceeding management turnover, etc. The PE firms will focus on the basics and meticulous cash management in the upcoming year.

✍Slow PE Exits and Booming Secondary Markets

In 2023, the exits remained low. However, the companies resorted to initial public offerings to achieve liquidity, though it was slow, too. Even though 2024 is not a very active year for exits, it may still pick up and do better than 2023. The private equity secondaries are expected to do fairly well amid slow PE exits. According to the Goldman Sachs Asset Management data, 48% of LPs may boost allocations in the next few years. This will lead to a rise in LP-led and GP-led secondary markets.

✍Rise in Leveraged Buyouts

Leveraged buyouts had become a thing of interest in 2023. The experts believe that the same charm will continue to grow in 2024. As per the Pitchbook data, LBO and M&A deal activity achieved 17-month high growth in September 2023. Despite high rates and too much leverage, LBO activity is growing by focusing more on equity during deal structuring.

✍Stricter regulations

Last year, the private equity industry witnessed a series of regulations. For example, the U.S. Security and Exchange Commission’s new guidelines for private equity fund advisors deserve a mention. These guidelines set a critical benchmark for private fund industry rules and regulations. Due to the immense private market growth in the U.S. in the last few years, the SEC believes that the private capital space needs a new regulatory handbook. In 2024, the private equity managers must ensure new rules compliance. Following these regulatory requirements will be vital for maintaining investor relations and trust, back-office processes, and a transparent working environment.

✍The Use of Artificial Intelligence Will Grow

Like every other field, even PE firms want to move forward with artificial intelligence and avoid lagging behind the competition. The private equity industry is looking for ways to develop efficient uses for AI. In 2024, private equity firms will focus on AI implementation, from automating back-office processes to enterprise-scale. Functions like due diligence, LP reporting, value-driving, large-scale enterprise transformation, etc., through Generative AI, are in the pipeline for 2024.

✍Geopolitical Effect

Though geopolitical events do not have a lasting impact on the markets, major economic disruption or geopolitical effects on markets cannot be completely ignored. Due to the Israel-Hamas break out in October’23, there was a short-term impact on the financial market. The tension has led to uncertainty, which is likely to continue in 2024 if the conflict holds on. The Russia-Ukraine war is another one leaving its mark on private equity. The impacts include slow IPOs and exits, fewer deals in the geographic areas, etc.

✍Develop Retail Channel

Private equity firms will continue to develop the retail market. Like professional investors, even retail investors are attracted to PE. Hundreds of private equity firms have invested in RIA companies, and many have offered crossover opportunities with wealth service companies. With M&A and investment models, PE companies provide wealth management services to retail investors.

✍Healthcare Expansion

The increased focus on healthcare, increasing costs, and medical technology advancements have attracted private equity firms. The health segment is expected to grow significantly in the coming years. PE firms might heavily invest in the companies providing medical products and services. Some PE firms are already buying distressed healthcare facilities for tremendous value creation.

✍Focus on ESG

Environmental, social, and governance (ESG) considerations have become crucial for all! In 2024, we expect to see more firms prioritizing ESG in their investment decision-making process. It is also likely that ESG-related initiatives will be applied in the portfolio companies.

Wrapping up

As stated above, many transformations are going to happen in 2024! Those in private equity careers path must study the PE 2024 trends like focus on AI, retail channel development, infrastructure investment, value creation, ESG, etc.. Leveraged buyouts and secondary markets are also key priorities.