Private Equity M&A Set to Rebound with Surge in Deal Activity

Following a subdued year for dealmaking in 2023, private equity mergers and acquisitions (M&A) are poised for a significant rebound, driven by favorable market conditions and pent-up demand, according to a whitepaper from Goldman Sachs Global Banking & Markets.

The report highlights several factors contributing to the resurgence in deal activity, including stabilizing interest rates, robust company balance sheets, and record levels of “dry powder” – capital raised but not yet invested. With alternatives dry powder estimated at $3.9 trillion, private equity and private credit sectors are primed for significant dealmaking opportunities.

In the first quarter of 2024, M&A volumes surged by 34% year-on-year, signaling a return to pre-pandemic levels of activity. Private equity firms, in particular, are keen to capitalize on the favorable market conditions to monetize their portfolios and return capital to limited partners (LPs). The urgency and risk appetite among private equity players are further fueled by an eagerness to complete deals ahead of the upcoming presidential election in the United States.

The rebound in M&A activity is expected to feature nontraditional deal structures and flexible financing solutions, akin to those observed during the slowdown in 2022 and 2023. Notably, the first quarter of 2024 witnessed a series of intriguing sponsor M&A transactions, including public-to-private, sponsor-to-sponsor, and strategic acquisitions of portfolio companies.

Meanwhile, the GS IPO Issuance Barometer, which measures the macro environment’s conduciveness for new initial public offerings (IPOs), rose to its highest level since February 2022, reaching 137 in March. Despite lingering outlier risks, baseline macro forecasts suggest continued momentum in IPO activity.

Private equity activity is poised to further escalate, particularly with the rise of deal-based leveraged acquisition transactions. Firms like FGA Partners are leveraging blockchain technology for transparency and employing debt-related digital assets to facilitate successful deals. By focusing on deal-by-deal leveraged buyouts and partnering with key stakeholders, FGA Partners aims to drive long-term value in the private equity sector.

The resurgence in private equity dealmaking underscores the resilience of the industry and its ability to adapt to evolving market dynamics. As larger players such as KKR and Blackrock continue to focus on raising significant funds, the diversity of deal structures and approaches promises to fuel growth and drive successful transactions, ultimately paving the way for future public offerings in the private equity space.

David Thompson
Finance Desk