Aruj Singla’s Post

🚀 Global Private Equity: Stabilizing but Still Searching for Momentum 🚀 The private equity (PE) sector is showing signs of stabilization after a two-year decline in deal-making and exits. However, the road to recovery is filled with challenges, and activity remains subdued compared to historical standards. 🔹 Deal Trends: Through May 15, 2024, global PE buyout deal counts are down 4% annually, expected to remain flat for the year. Yet, deal values are projected to rise 18% to $521 billion, driven by larger average deal sizes. 🔹 Exits and Fundraising: Exit values are set to increase by 17% to $361 billion, marking the second-worst year for exits since 2016. Fundraising is forecasted at $1.1 trillion, a 15% decline from last year, with significant disparities as the top 10 funds capture 64% of total capital. 🔹 Challenges Ahead: Higher interest rates, geopolitical instability, and a gridlock in exits are major hurdles. PE firms need to adapt to the "new normal" and focus on value creation in their portfolio companies. 🔹 Pressure on GPs: The slump in exits pressures General Partners (GPs) to return capital to Limited Partners (LPs), impacting new fundraising efforts. Only a small minority of LPs are satisfied with GPs' urgency in increasing liquidity. 🔹 Optimism and Strategy: Despite challenges, there's optimism as deal pipelines begin to refill. A full recovery may take time, but the initial public offering (IPO) market shows promise. PE firms must understand LP expectations, develop strategic plans, and focus on value creation to navigate these turbulent times. 🔹 Key Global PE Deals in 2024: Toshiba: $15B take private deal by Japan Industrial Partners. Qualtrics: $12.5B take private deal by Silver Lake and CPPIB. Worldpay: $11.4B leveraged buyout by GTCR. As we move forward, adapting to the changing landscape and making decisive moves will be crucial for success. The PE industry is at an inflection point— it's a time to embrace the challenge and drive growth! Credit: Bain & Company, EY, Preqin, PitchBook, Dealogic #PrivateEquity #Investment #Finance #BusinessGrowth #MarketTrends #DealMaking #Fundraising #IPO #Strategy #Leadership #ValueCreation

IPOs, Private Equity vs large cap stock indices hitting new highs: two sides of business “ Entrepreneur vs Annuitant ? ” Private equity groups globally are sitting on a record 28,000 unsold companies worth more than $3tn, as a sharp slowdown in dealmaking creates a crunch for investors looking to sell assets. The decline in value was even bigger where private equity groups sold portfolio companies to rivals... The value of companies sold to other buyout groups fell 47 per cent last year, with a mismatch in opinion over how much the assets were worth being the main reason why. This has prompted the industry to use alternative money-raising tactics, including so-called net asset value financing — loans secured against typically highly indebted portfolio companies — and transferring companies to new internal funds. This can allow in new investors while others exit. NAV loans in particular are under more scrutiny from investors as they have become more common. Now there are some signs that the traditional initial public offering exit route is making a comeback. Companies have raised $3.2bn in European IPOs since January, more than double the amount over the same period last year, a performance that puts the market on track for the best first quarter since 2021, according to data from the London Stock Exchange Group. (FT) / Bain & Company 🧐 French companies listed on CAC40 trade now close to 2 times their Price/Book ratio. French small caps after their relative decline (-50% for 3 years) trade 1,2 time P/B. The US Magnificent 7 and European Granolas (successful huge companies you dream to hold in your portfolios since they took of in 2023) are not in private equity books… betting on large caps indices is not helping economy!

According to an Institutional Investor article, IPOs globally have fallen considerably by 45 percent between 2021-2023 and have jolted the investments in private markets. "Private market assets under management are expected to grow at about 9 percent annually through 2032, more than twice the rate of public market assets. By 2032, total private assets could reach at least $60 trillion, according to Bain & Co."

Private Equity From McKinsey & Company Ten private-markets considerations - "Secondaries market sustains its growth trajectory With limited IPO and traditional deal activity, managers are increasingly turning to the secondaries market to monetize investments that are nearing the end of their hold periods." #privateequity #pe #privates #placementagent #privatecredit #secondaries

Private equity firms showed remarkable adaptability in 2023, capitalizing on opportunities across various industries, assets, and transaction types, as highlighted in a recent report from EY. By investing capital strategically, some funds obtained top-tier assets at discounted prices, while others discovered new entry points in response to macroeconomic trends. Here are some of the key takeaways featured in the report: > 2023 ended on a high note, with firms announcing deals worth a total of US$124 billion, making it the most active quarter in terms of value. The final quarter of the year saw an impressive 11% increase in value compared to Q3. > November was particularly busy, coming in as the second-most active month in the past year and a half, with deal announcements totaling US$71 billion. The steady volume in Q4 highlights the increasing prominence of larger deals. > Despite facing several obstacles in the mergers and acquisitions market in 2023, including inflationary pressures, rising interest rates, geopolitical instability, and macroeconomic uncertainty, private equity firms remained a significant player, accounting for 25% of aggregate M&A activity. > With rising interest rates, the value of operational value-add continues to increase, further emphasizing the adaptability and strategic expertise of private equity firms. Read more from the report here: https://lnkd.in/eFtFuESQ #PrivateEquity #Leadership #IPO

The median holding period for private equity-backed portfolio companies is now 5.7 years, the highest value since Private Equity Info began tracking this metric in 2000.  We see this as a great trend, because it causes less disruption at the companies and gives the private equity firms longer to grow the companies and increase value. What are your thoughts? #privateequity #valuations #businessvaluations

The era of easy returns in private equity (PE) is behind us. With a more challenging economic landscape, PE firms can no longer rely on simple financial engineering to deliver returns. 📉 As highlighted in the Financial Times article, "Private equity: The lazy days are over", industry leaders are facing higher interest rates and market uncertainties, requiring a shift towards operational improvements and active management. 🔸 End of Easy Leverage: High interest rates and expensive debt have brought an end to leverage-driven high returns. Now, PE firms must focus on boosting operational efficiency within their portfolio companies to achieve desired returns. 🔸 Tougher Exits: Despite central bank rate cuts, M&A activity and IPOs have not picked up as expected, making exits more difficult. PE firms are exploring alternatives such as partial monetization, selling stakes, and continuation funds to realize value. 🔸 Demand for Quality Businesses: Even with challenging exit conditions, demand remains strong for high-quality, cash-generative businesses, particularly from strategic buyers. Implications for Buy-and-Build Strategies: 🔸 Selective Acquisition Targets: With rising financing costs, PE firms need to be more discerning when choosing acquisitions. The focus should now be on companies offering the most potential for synergies and operational improvements, rather than simply scaling. 🔸 Margin Expansion over Multiple Expansion: To drive returns, PE firms should prioritize expanding margins through operational efficiencies, cost reductions, and unlocking synergies via platform integration, instead of relying on multiple expansion, especially in secondaries. 🔸 Longer Holding Periods: Tougher exit environments may require firms to hold investments longer. Buy-and-build strategies should therefore focus on organic growth and improving margins to sustain value over extended periods. As PE adapts to these new challenges, buy-and-build strategies will need to become more disciplined, operationally focused, and value-driven to succeed in today’s market. 💼 📲 Follow us for the latest insights and updates! #PrivateEquity #BuyAndBuild #InvestmentStrategy #OperationalExcellence #Finance #PrivateMarkets #MergersAndAcquisitions #InvestmentOpportunities #GlobalInvestment #BusinessStrategy #MarketTrends

Private equity firms showed remarkable adaptability in 2023, capitalizing on opportunities across various industries, assets, and transaction types, as highlighted in a recent report from EY. By investing capital strategically, some funds obtained top-tier assets at discounted prices, while others discovered new entry points in response to macroeconomic trends. Here are some of the key takeaways featured in the report: > 2023 ended on a high note, with firms announcing deals worth a total of US$124 billion, making it the most active quarter in terms of value. The final quarter of the year saw an impressive 11% increase in value compared to Q3. > November was particularly busy, coming in as the second-most active month in the past year and a half, with deal announcements totaling US$71 billion. The steady volume in Q4 highlights the increasing prominence of larger deals. > Despite facing several obstacles in the mergers and acquisitions market in 2023, including inflationary pressures, rising interest rates, geopolitical instability, and macroeconomic uncertainty, private equity firms remained a significant player, accounting for 25% of aggregate M&A activity. > With rising interest rates, the value of operational value-add continues to increase, further emphasizing the adaptability and strategic expertise of private equity firms. Read more from the report here: https://lnkd.in/d4cjwRY4 #PrivateEquity #Leadership #IPO

Private equity has historically outperformed public markets across various time horizons, driven by the active engagement of managers in strategy and value creation. KKR cites examples of this hands-on approach and highlights how the private market offers a growing opportunity set as the number of public companies declines. Alisa Wood and Chris Harrington | KKR https://lnkd.in/dS_f8me5 #LBO #Buyouts

What’s Next for Private Equity (PE)-backed M&A? The world of private equity (PE) is navigating challenging yet exciting times. After a quieter period in 2023, PE activity is steadily picking up in 2024, with trends signaling a shift in deal-making strategies and opportunities. In the latest Q&A from Financier Worldwide, industry leaders explore how private equity (PE) firms navigate the challenges of rising interest rates and valuation discrepancies. https://lnkd.in/e_ktYyBZ Experts provide predictions on PE-backed deal activity in the coming months, offering strategic advice to PE firms on executing successful transactions in today’s M&A market. They also delve into the key factors driving PE-backed deals and outline the benefits for businesses acquired by PE firms. From operational improvements to innovative financing structures, today’s PE firms are focusing more on creating long-term value and “sweating the assets”. The latter means that financial sponsors (like investors or private equity firms) need to be more proactive in improving the companies they invest in. They can't just rely on buying a company and hoping its value grows on its own. Instead, they should: - Focus on making the company more efficient and profitable. - Invest in the company's people and technology to keep it competitive. - Grow the business by expanding into new areas or buying smaller companies at a lower cost to increase its size and value. As interest rates begin to stabilize and geopolitical uncertainties diminish, we are seeing heightened activity in sectors like tech, healthcare, and renewable energy. Exit strategies are also evolving—more structured, strategic, and reliant on robust governance and management teams. With over $1 trillion in dry powder ready to deploy, PE firms are poised to capitalize on the upcoming wave of M&A and IPO opportunities. The outlook is optimistic for PE-backed deals. The key to success? Agility, comprehensive due diligence, and a focus on long-term value creation. Now is the time for PE professionals to prepare for the next wave of exits and seize opportunities in a rapidly changing market. #privateequity #mergersandacquisitions #pedeals #investmenttrends #businessgrowth #mamarket