Private Equity Update: Q4 2023 & Outlook for 2024

By: Ignacio Pou

• The conclusion of 2023 in private equity was resilient despite ongoing uncertainties in the market.
• Caution persists due to factors such as elevated interest rates, controlled inflation but still higher than desire, and geopolitical tensions, compounded by emerging challenges in the Red Sea. Nonetheless, there’s been an observable shift in market dynamics.
• Q4 saw significant deal announcements totaling US$124 billion, making it the most active quarter of the year in terms of deal value, with an 11% increase from Q3.
• A survey by EY revealed that 63% of PE investors anticipate a rise in distressed transactions in the coming year, alongside an expected increase in secondary buyouts.
• With approximately US$1.3 trillion in dry powder available, firms are well-positioned to acquire companies seeking exits and facilitate their next growth phase.
• Technology remained a dominant sector throughout the year, representing nearly one-third of PE investments by value. Investments in cloud technology remained active, particularly in areas like SaaS, with growing interest in machine learning integration and AI.
• In total, 298 exits were announced in 2023, valued at US$355 billion, representing a 28% decline in volume compared to the previous year.
• Consequently, the industry emphasizes liquidity through alternative assets, including both GP-led and LP-led secondary transactions, as well as fund-level facilities to support portfolio companies for extended durations and facilitate investor distributions.