Bain & Company has published the latest edition of its Private Equity Midyear Report, which analyzes the global evolution of the private equity market so far this year. Until May 15, 2024, the sector has raised 422,000 million dollarscompared to 438 billion in the same period last year.
This way, The report reveals that private equity fundraising could reach $1.1 trillion this year, 15% less than the previous year. Buyout funds lead the way, with $199 billion raised, and are expected to reach $531 billion by the end of the year, an increase of 6% compared to 2023. With respect to trading volumeAlthough activity appears to have stabilized, the study indicates that it still remains at historically low levels; above all, taking into account the 3.9 billion dollars of dry powder available and, of which, 1.1 billion correspond to committed capital pending investment from buyot funds.
Bain & Company explains that, as of May 15 of this year, the number of buyout operations had decreased by 4% annualized compared to the previous year, suggesting that 2024 could record figures similar to those of 2023. However, The total value of these operations is on track to end the year at $521 billion, up 18% compared to $442 billion in 2023, largely due to the increase in the average transaction size (from $758 to $916 million).
At the same time, divestments of buyout fund investees recorded stable annualized growth. Although The total value of these outflows is expected to reach $361 billion in 2024.which would represent an increase of 17% compared to 2023, this year could be the second worst since 2016. Besides, The stagnation of divestments is leaving private equity funds with “aging” assets and limits the return of capital to investors, who are pressuring to see their distributions on the paid-up capital increase.
In the opinion of Cira Cuberes, partner at Bain & Company, Growing investor interest in a small group of private equity funds is changing the landscape. «In the case of buyouts, the 10 largest funds have raised around 64% of the total capital to date. In turn, the largest, EQT X, valued at $24 billion, captured 12% of the total. This leaves the majority of buyout funds fighting for 36% of the remaining available capital and, at least one in five of these funds, is below their fundraising target,” he points out.
For Álvaro Pires, partner at Bain & Company, The outlook for private equity investment has improved and the total value of deals in 2024 is likely to be close to that of the pre-pandemic boom years. However, he warns that we should wait at least 12 months for the increase in disinvestments to also cause a change in the trend in fundraising. “Even if operations recover this year, we might have to wait until 2026 to see real improvement. In such a competitive market, companies must adapt to new macroeconomic challenges and fully understand investors’ expectations to develop comprehensive plans in their portfolios that meet their demands and add value,” adds Pires.
