U.S. Private Equity Market Recap - August 2024

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 leadership, please join our mailing list.

Key Takeaways from July

• Deal Activity: July 2024 deal count and deal value increased by 12% and 59% MoM, respectively—a strong start to Q3 and an encouraging sign for dealmaking recovery. 
  
• Fundraising: Fundraising remains challenging, and the market continues to be dominated by mega funds and buyout funds. 
  
• Outlook: Both the market and macro indicators point toward rate cuts at the Fed’s upcoming meetings, which should help spur M&A activity. However, PE firms will likely continue to focus on value creation strategies if rates settle at an elevated level, as expected.

U.S. PE Deal Activity

• Monthly deal activity and value rose: July deal activity increased by 12% MoM but fell 5% YoY. Deal value rose by 59% MoM to the highest monthly value since June 2023
  
• YTD deal activity down: YTD 2024 deal count is down 9% vs. YTD 2023 while deal value is up 4% over the same period
  
• Optimistic dealmaking outlook: Activity has been choppier than expected in 2024, but dealmakers remain optimistic. Macro indictors support the case for near-term rate cuts and Q3 is off to a strong start.

Top U.S. PE Deals by Deal Size

• Largest July 2024 deal: Skydance Investor Group, comprising RedBird Capital and the Ellison family, reached a deal to form “New Paramount” and will invest over $8 billion by way of a two-step transaction

PE Dry Powder & Fundraising Trends

• Elevated dry powder: Dry powder continues to sit at highs of around $1.2 trillion, but is expected to come down as dealmaking rebounds and investors put capital to work
• Weak fundraising: U.S. PE fundraising remains challenging, and YTD capital raised is tracking down to levels last seen in 2020 and pre-pandemic years
• Fundraising strategies: Mega funds and buyout strategies continue to dominate the fundraising market in 2024 YTD

Top U.S. PE Funds Raised by Size

• Largest July 2024 fund: New Mountain Capital closed its seventh flagship fund at $15.4 billion
• Total July fund stats: 31 funds of $100 million+ and 18 funds of $500 million+ closed in July

U.S. Leveraged Loan Issuance

• Monthly issuance levels up: $151 billion of leveraged loans were issued in July, up 31% MoM and 430% YoY
  
• Interest rate optimism drives activity: Banks have become more competitive in recent months as they try to win back market share from private lenders, especially with anticipated rate cuts 

A Look Ahead

• Interest rate cuts: The rate cuts investors anticipated earlier in the year seem to be right around the corner, with the Fed expected to cut rates for the first time since 2020 at its mid-September meeting.
  • Rate cuts from the leveraged loan and private credit market, not the Fed, have provided some relief to PE firms. But they have not meaningfully translated to higher levels of deal activity.
• Continuation funds still popular: GP-led secondaries, or continuation funds, remain a popular strategy among aging funds as more traditional M&A and IPO exit channels are muted.
  • The continuation fund model will gain further traction as secondary strategies continue to attract investor capital and demonstrate success. One example is the sale of SRS Distribution from Leonard Green and Berkshire Partners to Home Depot in March.
• Fundraising outlook: With many large PE players having already closed flagship funds and mid-market managers facing a more challenging environment, fundraising has the potential to be front-loaded in 2024 and finish down compared to prior years.
  • Beyond the largest managers, the headwinds to raising buyout capital remain strong with high costs of capital along with a slump in exits and distributions. 
• Take-private deals increase: There has been an uptick in take-private deals YTD in 2024, with deal count on track to outpace 2023.
• Value-creation strategies favored: Ongoing uncertainty and volatility in the market lead PE firms to prioritize value-oriented strategies.
  • The bid-ask spreads between PE firms have led to limited sponsor-to-sponsor deal activity, leaving only a few other sellers, namely nonbacked companies. Additionally, nonbacked companies are attractive targets as they provide lots of opportunity for value creation.