Private equity exits increased nearly 50 per cent in the year to November 1 2024, new research has revealed, partly as a result of high interest rates. Despite the increase, distributions from private equity funds have been running significantly below investor expectations, but are forecast to improve during 2025.
Research from placement agent MCAM Group found that there were 177 successful private equity exits from investments through M&A in the year to November 1 2024. This was up by 48 per cent from 120 in the previous year and approximately in line with 181 recorded during 2021-2022.
According to MCAM Group, exits through M&A have increased partly due to soaring interest rates, which have had a negative impact on other M&A activity and public listings.
MCAM Group Managing Director Lars Bjoergerd also said that the pricing and availability of acquisition financing had been a factor, with improved access to financing helping “strategic buyers and other potential bidders for private equity-owned companies”.
Bjoergerd commented: “The M&A market has come back to life in UK, greatly improving the options for private equity funds looking to exit their investments. Distributions to investors are still an issue but the environment is now a lot healthier.”
Bjoergerd added that, with the UK listings market only just showing “green shoots” of recovery and potentially some way from returning to its long-term average, listings were a “far less dependable” option for private equity firms than sales.
However, Bjoergerd also stated that, amid weak private equity distributions, investors were potentially applying more scrutiny to private equity managers that do not have a track record of successful exits.
He commented: “Institutional investors such as pension funds, endowments and foundations need regular distributions from the private equity funds that they invest in and closely monitor distributions to paid-in capital levels.”
“Until the exit environment is back to full health, investors are going to wary of investing in funds that have not been able to make distributions at the expected levels.”
Despite weak distributions to investors, improving liquidity conditions have led to forecasts that these could improve during 2025, with BlackRock recently stating that a better interest rate environment had helped global quarterly exit values return to near pre-pandemic levels.
BlackRock stated that an active exit market and greater focus among private equity managers on returning capital was "offering relief to investors seeking distributions,” adding that 2024 “saw a turning point with distributions overtaking capital calls for the first time in eight years.”
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