.png){kind=small}
As we cruise into the final stretch of 2024, the private equity (PE) world is giving us some serious whiplash. Deal volumes are up 23% from the dismal days of 2023, but they're still not hitting those champagne-popping highs of 2020-2021. The biggest shift? According to PitchBook, PE firms are favoring growth equity deals over traditional leveraged buyouts (LBOs). Why? With interest rates still doing their best mountain impression, debt is still less fashionable, and equity is picking up the slack.
But don’t worry, we believe it will start looking sunnier in 2025.
Now for the plot twist—valuations are somehow defying gravity. The average main street EV/EBITDA multiple has inched up from 4.8x in 2023 to 5.1x this year. For IT services, software, and digital marketing, my colleagues and I have witnessed the average even higher (6-8x).
Why? It’s the classic supply-and-demand story: tons of dry powder and not enough high-quality assets to go around. PE firms are like bidders at an auction, raising their paddles to buy the best companies at higher than usual multiples.
And speaking of exits (the PE world’s favorite topic), they’re still a bit sluggish. IPOs are catching dust, but we believe it’ll also pick up in 2025. In the meantime, continuation funds and dividend recaps are having their moment in the spotlight, with 2024 expected to break last year’s record. Holding onto companies longer is the name of the game today.
So, where do we go from here?
Private equity in 2024 is the definition of “bittersweet.” The market volume is recovering, but valuations are still in the stratosphere.
Everyone’s waiting for the IPO and M&A fairy to sprinkle some magic dust, but for now, we’re navigating a landscape of contradictions. Here's to 2025, where we believe things will make a little more sense.
Tim Mueller is an American businessman specializing in the growth of technology and communications companies. With 30 years of experience in startup, high growth and business exits, he is best known for identifying next generation technologies, assembling teams to leverage these opportunities, and building cultures for success. He has founded and sold four technology-based businesses prior to co-founding IT ExchangeNet.
Kommentare