Private Equity Showing “Resilience and Optimism”
About 60% of private equity executives are expecting an improvement in deal activity in 2024, according to new data from S&P Global Market Intelligence, a significant increase from 34% last year.
The Private Equity and Venture Capital Outlook report also noted that general partners (GPs) are showing increased interest in private credit, and that artificial intelligence (AI) will play a larger role in deal sourcing and target selection.
More than 60% of LPs investing in private markets reported they will increase their asset allocation to private credit in 2024.
“This year’s survey revealed more optimism among both GPs and investors as they are racing for a return to increased deal activity with increasing valuations allowing them to exit their backlog of investments and return cashflows to limited partners (LPs),” said Thomas Mercieca, associate director and lead author for the report, at S&P Global Market Intelligence.
Among private equity GPs, in the past year 37% reported expanding their use of private credit in deal financing, with larger PE firms making more use of private credit over bank loans.
Private equity GPs feel the fundraising outlook has bottomed out, with only 15% of GP respondents expecting deteriorating fundraising conditions in 2024, versus 45% at the start of 2023. However, among venture capital firms there are remaining concerns about LPs reducing their allocation to VC.
In terms of deal activity, mid-tier and smaller private equity firms are more optimistic for things to pick up in 2024 compared to their larger peers, the report said.
Most VC professionals expect deal activity to improve in 2024 (68%), but there are a substantial number of respondents saying conditions will stay the same as 2023 (28%).
S&P Global Market Intelligence surveyed 370 global private equity, venture capital and limited partner respondents across North America, Latin America, Asia Pacific, Middle Eastern and Africa regions between November 16, 2023 and January 12, 2024.