Bain & Company has published the latest edition of its Private Equity Midyear Report, analyzing the global evolution of the private equity market so far this year. Up until May 15, 2024, the sector has raised $422 billion, compared to $438 billion during the same period last year.
The report reveals that private equity fundraising could reach $1.1 trillion this year, 15% less than the previous year. Buyout funds are leading, with $199 billion raised, and are expected to reach $531 billion by the end of the year, a 6% increase compared to 2023. Although the activity volume seems to have stabilized, the study notes it remains at historically low levels, especially considering the $3.9 trillion in available dry powder, of which $1.1 trillion is committed capital pending investment from buyout funds.
Bain & Company explains that, as of May 15 this year, the number of buyout deals had decreased by 4% annually compared to the previous year, suggesting that 2024 could see similar figures to 2023. However, the total value of these deals is on track to end the year at $521 billion, 18% more compared to $442 billion in 2023, largely due to the increase in the average transaction size (from $758 million to $916 million).
At the same time, divestitures of buyout fund holdings have seen stable annualized growth. While the total value of these exits is expected to reach $361 billion in 2024, representing a 17% increase from 2023, this year could be the second worst since 2016. Moreover, the stagnation of divestitures is leaving private equity funds with “aging” assets and limiting capital returns to investors, who are pressing for increased distributions on their deployed capital.
According to Cira Cuberes, a partner at Bain & Company, the growing investor interest in a small group of private equity funds is changing the landscape. “For buyouts, the 10 largest funds have raised around 64% of the total capital to date. The largest, EQT X, valued at $24 billion, captured 12% of the total. This leaves most buyout funds vying for the remaining 36% of available capital, with at least one in five of these funds falling short of their fundraising targets,” she notes.
Álvaro Pires, also a partner at Bain & Company, believes the outlook for private equity investment has improved, and the total deal value in 2024 is likely to approach pre-pandemic boom years. However, he cautions that it may take at least 12 months for an increase in divestitures to also shift the fundraising trend. “Even if deal activity picks up this year, we might have to wait until 2026 to see a real improvement. In such a competitive market, companies must adapt to new macroeconomic challenges and fully understand investor expectations to develop comprehensive plans in their portfolios that meet their demands and add value,” Pires adds.
