Private equity dealmaking - 2024 outlook

2 February 2024

Tom Amster, Global Head of Macquarie Capital’s Financial Sponsors Group, discusses his outlook for private equity (PE) M&A in 2024 on The Deal’s podcast, ‘Behind the Buyouts’.

As well as covering the key trends that are driving a market rebound, Amster highlights industry sectors that are currently attracting private capital and shares his take on what’s in store for the future – from potential consolidations to a shifting regulatory landscape.

Following a subdued market environment in 2023 – which saw PE deals down more than 29 per cent from the year prior1 - Amster is upbeat about a market recovery in 2024, believing PE firms will be able to take advantage of a range of deal and financing opportunities.

Pressure from LPs to return capital means the time is now

This year, PE firms will hit a tipping point, progressing from a desire to transact to a need to transact. PE firms are ultimately recyclers of capital and will respond to significant pressure to return capital to LPs, even if that means a likely reduction in valuations. Amster believes 2024 represents the beginning of a "valuation reconciliation," which will spur a steady return to normalised market conditions. In 2023, dealmaking favoured the creative, with sponsors sustaining activity through public to privates, portfolio company addons, minority transactions and continuation vehicles. In 2024 he expects to see a return to more traditional majority buyout dealmaking. While valuations won’t shift dramatically, the scales will start to shift in favour of buyers.

Dry powder hits a new global record

Firms are sitting on record levels of dry powder, which Amster believes will be deployed aggressively in the coming months. According to S&P Global, private equity dry powder reached an unprecedented $US2.59 trillion globally at the end of 2023. The end of the Fed’s tightening cycle and the subsequent stabilisation of interest rates will provide the right backdrop to unleash this equity capital.

Competing financing sources will bolster the buyout markets

Competing financing sources will bolster the buyout markets and PE firms will look to both private credit and syndicated markets for the best financing terms for their targets and their portfolio companies. The competition between the private credit market, with record amounts of capital, and the syndicated market, backed by banks with limited leveraged finance exposure, will strongly accrue to the benefit of PE firms.

Opportunities at both ends of the investing spectrum

Those firms that focus on structured equity investing are seeing a significant opportunity to provide new, improved capital structures to solid companies that are struggling to produce free cashflow in a higher interest rate environment; the proverbial 'good company with a bad capital structure'. 

About Tom

Tom Amster joined Macquarie Capital in 2017 as a Senior Managing Director and is Global Head of the Financial Sponsors Group for Macquarie Capital.

Mr. Amster has over 25 years of investment banking experience. He has worked across multiple industry verticals and has led the execution of transactions across the full spectrum of mergers & acquisitions, equity, debt, and derivative transaction.

About the podcast

"Behind the Buyouts" is a podcast focusing on private equity trends, deal news, and M&A. It is produced by The Deal, a news organization that provides daily coverage, data and analysis of the deal economy.

  1.  US PE Breakdown, Pitchbook (2023)