Private equity activity showed some small signals that it is rebounding, but many parts of the private equity “lifecycle” face challenges entering 2024.
Details on 2Q24 Private Equity Activity
Fundraising | The 2023 vintage year experienced the full impact of the denominator effect, with sharp declines in fundraising for the year. The number of funds raised dropped by ~50% from the highs of 2021–22. Heading into 2024, fundraising continues to fall. The number of funds raised in 1Q24 was down by 42% compared to 1Q23, although the dollar amount raised is consistent.
Buyouts | 2023 represented the trough in buyout dealmaking, with early 2024 seeing improved liquidity conditions and higher public markets comps. Buyout activity was up by 7% in 1Q24 compared to 4Q23. Lower valuations, reflecting higher interest rates and a narrowing of the bid-ask spread, have led to greater activity.
Venture Capital and Growth Equity | Venture capital and growth equity have shown mixed signs of recovery but no large snapback, yet. 1Q24 deal activity was down by 9% from 4Q23. While venture capital activity was steady, there was a significant slowdown in growth equity, with no large growth equity deals during the quarter. 1Q24 exhibited a notable recovery in late-stage valuations. Similarly, early-stage valuations in 2024 also increased by 21% from the prior year.
Exits | In 2023, private equity exits declined dramatically by over 50% compared to their all-time record in 2021. Exit activity is up so far in 2024, by 15% compared to early 2023. IPO activity remains depressed, and the public offerings that do occur tend to be smaller in scale.
Returns | Public equity’s exceptional start to 2024 (led by the “Magnificent Seven” technology stocks) has left private equity in its wake. Over the long-term, private equity has outperformed public equity by 1%-3%.
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