Private equity rebound gains momentum amid challenges, shows report

The global private equity (PE) landscape is witnessing a resurgence, with dealmaking activity gaining traction in 2024.

However, lingering economic uncertainties and sluggish fund-raising continue to pose significant challenges to a full-scale recovery.

Bain & Company’s 16th annual Global PE Report, released in March, highlights a cautiously optimistic outlook for the industry, as both investments and exits show clear signs of revival after a prolonged downturn.

Investment and exit recovery signals renewed confidence

Following two years of sharp declines, PE investments and exits rebounded in 2024, marking a crucial turning point for the industry.

Pent-up demand among general partners (GPs) to deploy capital, alongside improving economic conditions and central bank interest rate cuts, fuelled a 37 per cent year-on-year rise in buyout investment value to $602bn (excluding add-on deals).

Exit activity also showed strong momentum, with global exit value climbing 34 per cent to $468bn. The exit count increased by 22 per cent to 1,470, suggesting a gradual thaw in the liquidity freeze that had constrained capital distributions to limited partners (LPs).

Despite this positive momentum, a backlog of 29,000 unsold companies remains, underscoring the need for further market improvements.

Navigating a complex macroeconomic ecosystem

Bain’s analysis underscores the importance of adapting to a dynamic macroeconomic environment in 2025. Factors such as inflation trends, interest rate fluctuations, trade policies, and geopolitical uncertainties remain critical variables influencing deal activity.

“2024 can be considered the year of the partial exhale. Whether the renewed impetus in 2024 can build will depend on how policy unfolds,” said Hugh MacArthur, chairman of Bain & Company’s global Private Equity practice.

“We think the headwinds that have held back activity since mid-2022 should continue to dissipate. The industry is anxious to make deals, GPs are finding creative ways to boost liquidity, more dollars should flow in from sovereign wealth funds and private wealth, and returns remain strong. But deal appetite is still tempered by the uncertainties keeping markets on edge,” he added

The Middle East’s expanding private equity landscape

Gregory Garnier, Middle East head of Bain’s Private Equity practice, pointed to the region’s growing appeal for investors. “The Middle East is entering a dynamic period of growth and transformation, creating unprecedented opportunities for investors. As economies diversify and sectors such as technology, renewable energy, and infrastructure gain momentum, private equity firms have a unique chance to drive meaningful value.”

He emphasised that forward-thinking funds leveraging regional expertise and strategic partnerships will be best positioned for success.

Global trends in dealmaking and exits

Bain’s report outlines strong growth in deal value across regions, with take-private transactions dominating high-value deals.

Europe led the recovery with a 54 per cent rise in deal value on a 9 per cent increase in deal count, while North America saw a 34 per cent increase in value.

The Asia-Pacific region recorded an 11 per cent rise in deal value, although weaker growth in China and a decline in Japan weighed on overall performance.

Public-to-private deals surged to $250bn globally, representing almost half of all deals over $5bn in North America. The technology sector remained a focal point, accounting for 33 per cent of buyout deals by value.

The financial services and industrial sectors also experienced significant growth, with deal values jumping 92 per cent and 81 per cent, respectively.

Exits rebounded strongly, driven by a 141 per cent increase in sponsor-to-sponsor transactions, which totalled $181bn in 2024. However, strategic exits remained flat, and IPO activity continued to lag, representing just 6 per cent of exits by value.

Despite the uptick in exits, distributions to LPs dropped to 11 per cent of net asset value — the lowest in a decade — indicating that liquidity challenges persist.

Fundraising faces continued pressures

Fundraising remained sluggish in 2024, marking the third consecutive year of decline. Total capital raised fell 24 per cent year-on-year and is down 40 per cent from the 2021 peak of $1.8tn. The number of funds closed dropped by 28 per cent to 3,000 — about half the pre-pandemic annual rate.

Buyout funds, while still the dominant asset class, raised 23 per cent less capital than in 2023, with total buyout fund-raising 11 per cent below the five-year average.

Limited partners (LPs) are becoming increasingly selective, directing capital towards the largest and most experienced funds. This trend has enabled top-quartile managers to raise significantly larger follow-on funds, while many lower-quartile firms struggle to meet targets.

Private equity competition

Bain’s report highlights structural shifts that will reshape the PE industry. Rising costs, intensified competition for deals, and mounting pressure on management fees are creating a more challenging operating environment.

As scale becomes increasingly important, large firms are leveraging their advantages to secure capital and expand market share. Bain anticipates that mergers and acquisitions within the alternative asset management industry will play a greater role, with 180 transactions recorded since 2021.

Looking ahead, private equity firms must redefine their strategies to maintain a competitive edge.

Bain emphasises that success will depend on differentiation, operational excellence, and the ability to navigate a rapidly evolving investment landscape.