Dechert | Private Equity's 2025 Outlook: Recovery Takes Shape Despite Global Headwinds
- Editor
- Dec 28, 2024
- 1 min read
What's New: Global private equity activity is showing clear signs of recovery heading into 2025, with deal values up 47% in the first three quarters of 2024 compared to the same period in 2023, reaching $703 billion worldwide.
Why It Matters: After a challenging period marked by high interest rates and geopolitical uncertainty, PE firms are adapting their strategies and finding new paths to value creation, signaling a potential return to more normalized market conditions.
Big Picture Drivers:
Interest rate cuts by major central banks, including the Fed's moves to 4.5%-4.75%, are creating a more favorable environment for deals
Record levels of dry powder ($2.62 trillion) are pressuring firms to deploy capital
Regulatory scrutiny, particularly in antitrust matters, is reshaping deal strategies
By The Numbers:
PE firms expect average net returns of 15.8% for 2024
60% of firms now offer co-investment programs, rising to 73% in North America
68% of respondents believe market conditions for exits will remain challenging in 2025
Key Trends to Watch:
GP-led secondaries continue gaining traction, with transaction volume quadrupling over five years
Sustainability and ESG considerations are now universal, with 100% of firms considering these factors
Club deals are increasingly appealing, with 61% of firms viewing them as highly attractive
The Bottom Line: While PE firms face persistent challenges from global economic uncertainty and regulatory pressures, falling interest rates and accumulated dry powder are creating conditions for a stronger 2025. Success will depend on firms' ability to navigate complex market dynamics while embracing new investment strategies and structures.
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