Following a challenging year marked by rising interest rates and slower growth, successful private equity firms are adapting to the changing environment, according to Dechert’s 6th annual Global Private Equity Outlook report.
According to the report, which surveyed 100 senior-level executives at private equity firms based in North America (45%), Europe, the Middle East & Africa (EMEA) (35%) and Asia-Pacific (APAC) (20%) with assets of more than $1bn, 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. Similarly, 59% intend to make a GP-stake divestiture over the next 24 months, with growth as the primary motivational factor.
Some 50% of those senior executives surveyed meanwhile, regard GP-led secondaries and continuation funds as growing trends related to the current economic environment, and 78% executives said that they already make use of private credit for acquisition financing at the portfolio level, a trend exacerbated by the US regional bank crisis in early 2023.
The report also highlights that 71% of execs expect rising regulatory scrutiny to negatively impact dealmaking plans over the next 12 months, while 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 retailisation of alternative investments.