2024 M&A Year in Review - Flipbook - Page 90
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Private Equity
We anticipate an increase in private equity
transactional activity in 2025, with momentum
expected to build during the second half of this
year. Although uncertainty around interest rates
persists — and some market indicators suggest
potential rate hikes — sponsors remain under
significant pressure to deploy and to return capital.
This pressure, coupled with vast amounts of dry
powder that sponsors are eager to invest, is likely to
drive an uptick in deal volume.
As seen in 2024, we also expect continued
growth in alternative deal structures beyond
traditional buyouts, including structured preferred
equity, convertible securities, co-investments,
and joint ventures. As private equity and private
debt providers increasingly collaborate to
maximize returns on investment, bridge the gap in
perceived valuations, and address market volatility,
creative deal structures are likely to become even
more prevalent.
In the months to come, sponsors will need to
navigate an increasingly uncertain macroeconomic
environment. Changes in tariff and trade policy —
particularly likely to affect key sectors such as
manufacturing, technology, and health care — pose
risks to supply chains and valuation assumptions.
Private equity firms pursuing cross-border deals or
companies reliant upon global supply chains may
need to incorporate flexible mechanisms such as
contingent purchase price adjustments or supply
chain resilience strategies.
Sponsors also are exploring secondary market
solutions, including continuation funds and
preferred equity recapitalizations, as liquidity
remains a key concern for limited partners.
The market has seen a shift toward more
bespoke financing arrangements, such as hybrid
credit facilities, enabling sponsors to extract
liquidity while maintaining exposure to highperforming assets.
Investors with existing interests in funds will
expect to see value creation. While tools like NAVbased lending and GP-led transactions supported
distributions in 2024, investors are increasingly
focused on how distributions are generated. As a
result, sponsors will pursue full exits where
possible to demonstrate realized value. At the same
time, continuation funds and strip sales are gaining
traction as sponsors look to extend hold periods on
high-performing assets while delivering interim
liquidity to LPs.
