U.S. Private Equity Market Recap – January 2025 – Corporate and Company Law

Read our latest insights into the U.S. private equity market. We
cover monthly deal activity and size, fundraising, exits, leveraged
loans, and a look ahead. To receive our private equity thought
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Key Takeaways

• U.S. PE deal activity:Deal activity was
  slightly down in 2024 with a 3% YoY decline, while deal value was
  up 14%. Transaction activity did not make the strong comeback
  dealmakers were hoping for in 2024 as investors navigated market
  uncertainty around rate cuts and the 2024 presidential
  election.




• Difficult fundraising
  environment: U.S. PE fundraising was down
  in 2024 on both a fund-count and capital-raised basis. The 2024
  fundraising market was particularly difficult for smaller firms and
  first-time managers.




• Positive 2025 outlook:
  Dealmakers are optimistic that M&A will pick up this year as
  various market forces are expected to boost deal activity. A Teneo
  survey showed that 83% of CEOs and 87% of investors are expecting
  more M&A activity in 2025.

2024 Recap

• Macroeconomic backdrop held strong: The
  recession risk heading into 2024 did not materialize and a new
  cycle of rate cuts began. The Fed made its first long-awaited rate
  cut in September and cumulatively cut rates by 100 bps by year
  end.




• U.S. presidential election concludes:
  Trump’s election win resolved market uncertainty around the
  next administration.




• Lackluster dealmaking comeback: Private equity
  deal activity didn’t make the robust comeback that industry
  participants were hoping for in 2024.




• Trends in deal activity: 2024 experienced an
  uptick in large take-private deals, an increase in corporate
  carve-outs, and a trend toward larger deal sizes.




• Rebound in exit activity: PE exits began to
  ramp up in 2024 but remain below normalized levels. Pressure to
  return LP capital persisted throughout the year and sponsors used
  an array of strategies, such as minority sales and continuation
  funds, to unlock liquidity.




• Major drop in fundraising: Both the number of
  funds closed and amount of capital raised fell for U.S. PE funds in
  in 2024 as capital gridlock persisted in the industry.




• Challenging environment for emerging managers:
  First-time managers and smaller firms struggled as LPs showed a
  preference for experienced managers, resulting in capital largely
  concentrated among larger managers and funds.




• IPO market improved: The U.S. IPO market began
  to unthaw in 2024 amid a buoyant equity market, but PE-backed
  companies mostly remained on the sidelines.
  
  Improved investor sentiment: The cautious optimism that started
  the year gave way to a rise in investor confidence by the end of
  2024.

U.S. PE Deal Activity

• Activity remained suppressed: 2024 annual deal
  count was down compared to 2023. While deal value increased YoY, it
  finished below historical levels.




• 2024 deal markets in limbo: Investors spent
  much of 2024 waiting for clarity on monetary policy and potential
  rate cuts, macro conditions to continue improving, and more
  conclusive policy outlooks following the presidential
  election.




• Optimistic outlook: Investor sentiment is high
  heading into the new year and dealmakers are expecting deal
  activity to pick up in 2025.




• Factors to drive 2025 deal activity: In
  addition to increased CEO and investor confidence, high levels of
  dry powder, an incoming pro-business and growth Trump
  administration, and pressure to exit and return LP capital are
  expected to boost transaction activity.

Trends in U.S. PE Deals: Size and Type

• Deal size increasing: The proportion of deals
  over $1 billion increased in 2024 and the average PE deal size
  increased in 2024 after falling for two consecutive years.




• 2024 deal type trends: Take-private deals grew
  in popularity as PE firms had high levels of dry powder and jumped
  on opportunities to acquire companies they deemed undervalued by
  public markets. Another deal type favored by PE firms in 2024 was
  corporate carve-outs, a trend expected to continue into 2025.

Trends in U.S. PE Deals: LBOs

• LBOs pick up: U.S. LBO deal counts and value
  picked up in 2024 after two consecutive years of decreasing
  activity. Interest rate cuts and strong financing markets helped to
  fuel leveraged buyout activity.




• Purchase price multiples up: Average LBO deal
  multiples for 2024 finished at 11.0x. Valuation gaps between buyers
  and sellers are continuing to close as financing becomes less
  expensive and market conditions normalize.

Trends in U.S. PE Deals: Exits

• Exits start to rebound: The number of PE exits
  picked up in 2024, but the value of exits remained below historical
  levels.




• Maturity wall builds: The maturity wall facing
  PE firms globally will continue to grow in the coming years as GPs
  look to wind down older vintages that are entering their harvesting
  age. Firms will face pressure to ramp up exit activity to realize
  gains on investments and return LP capital.

U.S. Fundraising & Dry Powder

• Fundraising drops: Both the amount of capital
  raised and number of funds closed fell in 2024 as the fundraising
  environment continued to face challenges.




• Dry powder ticks down: Despite dropping by
  ~10% in 2024, U.S. PE dry powder remains elevated at over $1.1
  trillion. Investors continue to face pressure to put raised capital
  to work, which dealmakers are predicting will help spur transaction
  activity in 2025.

U.S. Fundraising Trends: Size and Experience

• Longer fundraising cycle: The average length
  of fundraising jumped from 21 months in 2023 to 27 months in 2024
  for all U.S. PE funds. However, funds over $1 billion had an easier
  time raising capital, taking only 22 months on average to close,
  while funds under $1 billion took 33 months.




• Investors prefer larger funds: U.S. PE funds
  over $1 billion attracted 22% of raised capital in 2024, up from
  15% of capital raised in 2023.




• New managers plummet: As the fundraising
  market is particularly challenging for new firms, the number of new
  PE managers has dropped dramatically.

U.S. Fundraising Trends: Asset Class

• Private debt stays hot: Private credit
  remained a hot sector within alternatives in 2024. Large managers
  are continuing to grow as the industry is experiencing
  consolidation following a wave of M&A deals.




• Infrastructure grows: Infrastructure continues
  to attract capital as investors eye opportunities within the
  sector, particularly those related to digital infrastructure.




• Growth and VC gain: Growth and VC strategies
  raised a higher proportion of total U.S. PE capital raised in 2024,
  compared to 2023. Growth strategies specifically have been higher
  than pre-pandemic levels over the last 3 years.

IPO Activity

• U.S. IPOs pick up: Amid a strong year in U.S.
  public equities markets, the U.S. IPO market started to recover and
  ended the year with an increase in deal activity from 2023.




• PE-backed IPOs remain sidelined: PE-backed
  companies were mostly on the sidelines while the U.S. IPO market
  started to recover in 2024. However, industry analysts expect PE
  firms will be more active in the IPO market in 2025.

Trump’s Second Term: Potential Implications

Investors’ views

• Investors had a positive reaction following the election and
  believe Trump’s pro-growth and pro-business leanings will help
  drive M&A activity.




• However, industry players also caution that some of Trump’s
  anticipated policies may create headwinds and to expect volatility
  as the market navigates various policy implications.




• Investors will look to Trump’s first 100 days in office to
  provide an indication of how different policies such as trade,
  immigration, energy and tax will all come together to affect the
  business and investing landscape.

Key policy areas to watch

Industry-specific impacts

2025 Outlook

• Slower pace of rate cuts: The Fed has
  indicated that the pace of rate cuts will slow in the months ahead.
  Investors are anticipating anywhere between zero and four rate cuts
  throughout the year and do not expect rates to get under 3% by the
  end of 2025.




• Positive outlook for dealmaking and exits:
  Dealmakers are optimistic heading into 2025 and expect significant
  upside for PE activity in the year ahead. As a growing proportion
  of assets reach their harvesting period, firms will face mounting
  pressures to exit.

• Mid-market opportunities: Industry analysts
  expect investors to continue pursuing opportunities in the mid
  market in 2025 and anticipate these strategies will continue to
  perform strongly. Mid-market investments offer scalability and
  strike a balance between utilizing leverage and improving
  operational efficiencies to create value and drive returns.




• Mixed fundraising outlook: PE firms are
  optimistic the fundraising environment will improve as exits pick
  up and more capital is returned to LPs. However, capital raised is
  not projected to meaningfully increase in 2025, primarily due to
  fewer mega funds expected to close in the year.




• PE-backed IPOs poised for comeback: The IPO
  landscape is expected to shift in 2025, especially for PE-backed
  companies. Bankers and analysts are gearing up for a revival in the
  IPO market and expecting a flurry of listing announcements in the
  first half of 2025.




• 2025 M&A expectations: Both CEOs and
  investors have more favorable outlooks for M&A in 2025 compared
  to expectations going into 2024.




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