"Financial sponsors have been relatively quiet the last two years, with most of them focused on raising new capital, returning capital to LPs, or a combination of both. We are starting to see that dynamic change with more constructive markets."
Vivek Bantwal, Head of Global Financing Group

As the markets continue to heal and sentiment improves, we expect 2024 to be a year of rebalancing, bolstered by renewed optimism, fresh pools of capital and pent-up demand. A recalibration of markets and alignment of valuations have given way to a unique set of opportunities.

A key driver? The growth and diversification of alternatives, which continue to rapidly accelerate. The growing dry powder surplus — amid expectations of central bank cutting cycles around the globe — is fueling momentum that has already begun to bolster M&A volumes (Q1 activity was up 34% YoY) and financing markets, as an overall reopening takes hold.

Private Equity Inflection Point explores how macro drivers, coupled with an unprecedented $1.2T in PE dry powder and an estimated $6T in PE assets under management (AUM), have primed the capital markets for what we expect to be a robust ripple effect of strategic and financing opportunities through 2024 and beyond.

Key Opportunities in 2024

Expanding Possibilities in Sponsor M&A: As M&A volumes normalize and sponsor-backed activity rebalances, there will be greater opportunity for a “meeting of the minds” between buyers and sellers.

Public Equity Markets as a Key Liquidity Alternative: As sponsors monetize via public equity markets, the next several quarters should see increased deal count, volume, and industry breadth. We expect not only IPOs but also secondary public offerings to accelerate in the form of follow-ons and block trades.

The Private Markets and the Mainstreaming of Secondaries: Despite an increasingly active IPO market, the mainstreaming of the secondaries market and a more muted exit environment have ushered in a new era for private markets, which remain a viable option for corporates with pragmatic valuation outlooks.

Leveraged Finance Open for Business: The leveraged loan market is strengthening, and we expect it to become increasingly supportive of M&A financing throughout 2024 and 2025 as normalized loan trading levels spur lenders to seek new opportunities and support more aggressive underwriting structures.
 

Source: Dealogic as of 3/28/24, Preqin