Private Equity: A 2024 Pulse Check

June 25, 2024

As we embark on a new fiscal year, now is an opportune time to provide a market update and forecast the trends likely to shape the private equity (PE) sector in the year ahead.

Sustained Resilience Amidst Economic Uncertainty

Despite economic headwinds, private equity has demonstrated remarkable resilience. According to McKinsey & Company, global PE assets under management (AUM) reached a record $6.3 trillion in 2023, a 7% increase from the previous year. This growth was reinforced by robust fundraising activities and a strong demand for alternative investments amid volatile public markets.

Key Drivers and Challenges

The Rise of Mega-Funds

The landscape is increasingly dominated by mega-funds, firms that raised funds exceeding $10 billion. These funds leverage their substantial capital base to execute large-scale buyouts and infrastructure investments that smaller funds cannot match. They benefit from economies of scale by leveraging their size to negotiate better terms and achieve cost efficiencies in deal execution.

The growth trajectory of mega funds has been remarkable. Between 2010 and 2023, the number of mega-funds increased by over 200%. Last year, mega-funds collectively raised over $300 billion, accounting for a sizable portion of the global fundraising landscape.

Regulatory Scrutiny and ESG Integration

Regulatory changes and the growing importance of sustainability are impacting the PE landscape. Deloitte's recent market insights suggest that regulatory scrutiny, especially in the US and Europe, is expected to increase, with administrations placing a heavy emphasis on antitrust reform. Simultaneously, regulatory requirements and investor demands are driving a trend towards ESG integration and improved transparency. Last year, nearly 70% of global PE firms reported increased regulatory requirements, and over 80% implemented ESG criteria in their investment strategies.

Increased regulatory scrutiny has resulted in longer transactions timelines and higher due diligence costs, which reached an average of $1.5 million per deal in 2023, a 20% increase from the previous year. Additionally, a growing emphasis investor protection through transparency and accountability means firms must provide detailed disclosures on fund performance, fees, and conflicts of interest.

Market Opportunities

Technology and Digital Transformation

With ongoing digital transformation across industries, PE firms are increasingly targeting technology sectors alongside their venture capital counterparts. According to PwC, technology deals accounted for 30% of all PE transactions in 2023, a trend they expect to continue.

Most notably, investment in financial technology (fintech) reached $120 billion in 2023, a 25% increase from the previous year. The adoption of digital payment systems and financial services has accelerated due to increasing consumer preference for mobile transactions. Growing in tandem with the burgeoning fintech industry is an increased need for cyber security. S&P Global notes that from January 1 to May 5, private equity and venture capital investments in cybersecurity vendors soared to $8.51 billion, marking a significant 91% increase during the same period in 2023. Overall, the annual cost of cyberattacks is projected to reach $10.5 trillion by 2025, representing a staggering 300% increase since 2015.

However, the high level of interest in technology investments has led to increased competition and elevated valuations, which could potentially impact returns if not managed prudently. Nonetheless, a digital transformation gives PE firms an ample opportunity to invest in innovative technologies that are reshaping industries.

Healthcare and Life Sciences

In 2023, healthcare deal volumes declined from their 2021 peak. However, with an aging population and increased healthcare spending, this sector presents lucrative opportunities for long-term investors.

The global population aged 65 and over is expected to double by 2050. Such a significant shift in demographics drives the demand for healthcare services, pharmaceuticals, and long-term care facilities. Moreover, the prevalence of chronic diseases such as diabetes, cardiovascular conditions, and cancer is rapidly increasing. This trend will boost demand for specialized medical services, devices, and treatments, creating ample opportunities for PE investment.

Beyond overall health trends, the market is extremely fragmented. PE firms are acquiring and merging healthcare providers to achieve economies of scale and improve operational efficiency, often referred to as a roll-up or buy-and-build strategy.

Market Forecast for the Next Year

Fundraising and Dry Powder

Fundraising activities are expected to remain robust, with Preqin projecting that global PE AUM could surpass $18.3 trillion by 2027. However, the market will likely see a divergence in fundraising success, with most of the capital funneling to the top-tier funds.

Dry powder levels are at an all-time high, estimated at $13.1 trillion  in 2023. This accumulation represents a backlog of uninvested capital, likely from a combination of successful fundraising and cautious investment strategies. With such a high level of reserves, the sector is ready to take advantage of market dislocations, distressed assets, and emerging sectors.

A significant portion of recent fundraising has been concentrated in top-quartile and mega-funds. This concentration has led to a barbell effect within PE, with large funds raising substantial amounts of capital while smaller funds struggle to attract similar levels of investment. Increased competition for high-quality assets, driven by the large amounts of available capital, has increased purchase prices, leading to concerns about overvaluation.

Deal Activity and Valuations

Deal activity is anticipated to rebound from a 2022 decline, with PE deal value surpassing $1.3 trillion in 2023. The competitive landscape for high-quality assets has led to increased valuations. M&A EV/EBITDA multiples ticked upward from 8.9x to 9.3x year-over-year. To counteract high valuations, PE firms are emphasizing operational improvements in their portfolio companies. This involves streamlining processes, margin expansions, and driving revenue growth. Furthermore, firms are also pursuing strategic initiatives, such as market expansion and product innovation, to enhance the competitiveness and growth potential of their portfolio companies.

Exit Strategies and Returns

With more favorable market conditions and the need for liquidity among limited partners (LPs), exit volumes are expected to rise. Exit activity in PE declined last year, with a 40% decline from a 2021 high. However, with sponsors struggling to return cash to their LPs, 2024 will likely focus on how creatively the industry can generate liquidity.

IPOs remained a popular exit strategy, which achieves significant returns by taking portfolio companies public. In 2023, there were over 72 PE-backed IPOs globally. While this was a decline from the previous five years, the attractiveness of public markets for realizing gains and providing liquidity to investors is still prevalent.

Additionally, sales to corporate buyers, or strategic sales, and secondary exits have remained prominent exit routes. Most notably, 2023 was the second most active year for secondaries with a 4% increase in deal volume year-over-year.

Over the past decade, private equity has outperformed other private asset classes, with a median net IRR of 16.4% for funds launched between 2011 and 2020, as of September 30, 2023, surpassing even the top-quartile returns of other private assets. To achieve these returns, the timing of exits has become increasingly strategic. The timing process involves assessing market conditions, industry trends, and potential buyer interest to determine the optimal time to exit an investment. However, the high returns may not be sustainable in the long run if valuations continue to rise and economic conditions deteriorate. In 2023, the average holding period for portfolio companies was 5.6 years.

Despite the challenges of high rates increasing the cost of capital and economic uncertainty, firms are expected to continue achieving attractive returns.


As firms navigate an evolving financial landscape, economic uncertainty and regulatory changes present both challenges and opportunities. The sector is poised for growth and innovation, driven by a shift towards specialized investments. However, the industry must remain vigilant and adapt to potential headwinds, such as rising valuations, increased competition, and economic volatility. The coming year promises significant activity that will shape the future of private equity.