Challenging financing conditions and macroeconomic disruptions have ushered in a period of lackluster M&A activity the last few years. Sellers are reluctant to realize investments at what are perceived to be depressed valuation multiples. Buyers meanwhile are wary of overpaying and unwilling to meet sellers at multiples of a bygone era. The resulting valuation gap has contributed to a reduction in exits for GPs and thus reduced distributions – the lifeblood of private equity.
In a fundraising context, reduced distributions restrict the capital LPs can re-invest in PE, an otherwise self-funding asset class for the better part of the last decade. This challenging dynamic of scarce LP capital is driving a multitude of adverse knock-on effects for GPs. These include smaller LP check sizes, extended fundraising timelines, and enhanced LP negotiating power on pricing and terms...
“Now you can say, ‘OK, the Eagle has landed.’” – David Kelly, chief global strategist, J.P. Morgan Asset Management, on a soft landing.
Featuring Charts
Chart of the Week: On Holds
In the absence of M&A activity, PE portfolio companies are held for extended periods. Source: PitchBook(Past performance is no guarantee of future results.)
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Chart of the Week: Who’s The Driest?
Despite claims of a “too crowded” private debt market, PE dry powder is four times greater. Source: Preqin(Past performance is no guarantee of future results.)
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Chart of the Week: A World Away
Fund managers are looking increasingly to global issues for biggest risks. Source: The Daily Shot, BofA Global Research(Past performance is no guarantee of future results.)
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Chart of the Week: All of the Above
Investors expect modestly lower credit spreads, no change, and some widening. Source: The Daily Shot, PitchBook/LCD(Past performance is no guarantee of future results.)
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Chart of the Week: On A Roll
September’s surprisingly strong jobs report further signals a soft landing. Source: The Daily Shot(Past performance is no guarantee of future results.)
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Chart of the Week: O Canada
Canadian GDP forecasts have been increasingly bullish since January. Source: The Daily Shot, Bloomberg(Past performance is no guarantee of future results.)
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October LBO financing conditions show strength, despite mixed pricing outcomes in bifurcated market With more than US$32bn of LBO term loan B issuance successfully placed in 3Q24, LBO financing activity has emerged similarly strong in 4Q24…. Subscribe to Read MoreAlready a member? Log in here...
PDI Picks – 11/4/2024
Hard-won gains can be retained Read PDI’s Report: LP Perspectives 2024 report Read PDI’s Report: LP Perspectives 2024 report Respondents to a PDI survey believe that private debt will not easily give up the share it has won at the larger end of the market. In 2022 and 2023, as talk of private debt being…
The Pulse of Private Equity – 10/28/2024
Carveouts/divestitures as a share of all US PE buyouts by quarter Download PitchBook’s Report here. Carveouts accounted for 11.7% of all US PE buyouts in Q3 2024, a rebound from the decline to 9.1% in Q2…. Subscribe to Read MoreAlready a member? Log in here...
Middle Market & Private Credit – 10/28/2024
Record U.S. BDC Unsecured Debt Issuance Helps Address Refinance Needs (Part 2) Click here to download report. Since the beginning of September, rated BDCs have collectively issued $4 billion in unsecured debt. Blue Owl Credit Income Corp. accounts for $1.3 billion of this, including a recent AUD450 million Australia dollar-denominated offering…. Subscribe to Read MoreAlready
Leveraged Loan Insight & Analysis – 10/28/2024
Total leverage on US LBO deals exhibited hints of bifurcation across EBITDA ranges In 3Q24, total leverage on US LBO deals exhibited hints of bifurcation across different EBITDA ranges…. Subscribe to Read MoreAlready a member? Log in here...
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