Dechert Report Reveals Private Equity Firms' Resilience and Adaptability Amid Economic Challenges

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Nov 06, 2023, 07:00 ET

The 2024 Global Private Equity Outlook provides a view into what dealmakers need to know as they harvest their holdings and kickstart capital raising to sustain their investment cycles

NEW YORK, Nov. 6, 2023 /PRNewswire/ -- Dechert LLP, in partnership with Mergermarket, announced today the release of their 6^th annual Global Private Equity Outlook report. This latest edition of the report provides a comprehensive analysis of the private equity (PE) market, offering insights into the challenges and opportunities that lie ahead in 2024.

The report reveals that despite a challenging year marked by rising interest rates and slower growth, successful private equity firms are adapting to the changing environment. Based on responses from senior executives within PE firms in North America, EMEA, and APAC, the key findings include:

94% are likely to pursue take-private transactions, a significant shift from 2022 when only 13% of GPs expressed firm intentions of pursuing take-privates.
59% intend to make a GP-stake divestiture over the next 24 months, with growth as the primary motivational factor.
50% view GP-led secondaries and continuation funds as growing trends related to the current economic environment.
78% already make use of private credit for acquisition financing at the portfolio level, a trend exacerbated by the U.S. regional bank crisis in early 2023.
71% expect rising regulatory scrutiny to negatively impact dealmaking plans over the next 12 months.
21% say their biggest challenge in replenishing dry powder is competing against the largest and most diversified GPs. This continued bifurcation of the fundraising market is likely to increase with the shift towards the retailization of alternative investments.

"Despite a decline in fundraising and dealmaking coupled with debt becoming costlier and scarcer, private equity marches forward. The shift towards take-private transactions is an example of how they are not just surviving but thriving in the face of market volatility, finding value in public markets where others see uncertainty," said Dr. Markus P. Bolsinger, co-head of Dechert's global private equity practice. "Given the additional regulatory complexity and public scrutiny of these deals, active engagement of skilled professional advisers from the very start is a necessity, particularly in the U.S., where stockholder-plaintiffs have recently secured significant damages awards in the Delaware courts against acquirors in take-privates."

As we move into 2024, the trends highlighted in the report emphasize the industry's commitment to finding innovative solutions to sustain investment cycles and provide liquidity to investors, even in the face of challenges. The private equity market continues to evolve, demonstrating its resilience and capacity to thrive in an ever-changing landscape.

The 2024 Global Private Equity Outlook report is available for download on Dechert's website.

About Dechert
Dechert is a global law firm that advises asset managers, financial institutions and corporations on issues critical to managing their business and their capital – from high-stakes litigation to complex transactions and regulatory matters. We answer questions that seem unsolvable, develop deal structures that are new to the market and protect clients' rights in extreme situations. Our 1,000+ lawyers across 21 offices globally focus on the financial services, private equity, private credit, real estate, life sciences and technology sectors.

About Dechert's Global Private Equity Practice
Dechert has been at the forefront of advising private equity firms for almost 40 years. With more than 300 private equity and private investment clients, we have unique insights into how the industry has evolved and where it's going next. Our globally integrated team of more than 350 private equity lawyers advises private equity, private credit and other alternative asset managers on flexible solutions at every phase of the investment life cycle.

Methodology: Mergermarket, on behalf of Dechert LLP, surveyed 100 senior-level executives within private equity firms based in North America (45%), Europe, the Middle East & Africa (EMEA) (35%) and Asia-Pacific (APAC) (20%). To qualify for inclusion, the firms needed to have US$1 billion or more in assets under management (AUM) and respondents could not be first-time fund managers. The survey included a combination of qualitative and quantitative questions, and all interviews were conducted over the telephone by appointment. Results were analyzed and collated by Mergermarket, and all responses are anonymized and presented in aggregate.

SOURCE Dechert LLP