February 2025
Private Equity FAQ for Business Owners
BY V&R ADVISORY TEAM
If you’re a business owner considering a sale to private equity or simply looking to understand the private equity landscape better, here’s what you need to know:
Q: What is the current state of the private equity market?
The private equity market is experiencing mixed trends. While 2024 saw an increase in global buyout deal value, the fourth quarter slowed down, except in Europe, where buyout deal activity increased.
Private equity fundraising also slowed in late 2024, but funds are closing faster, indicating a potential recovery.
Q: How do interest rates affect private equity?
Monetary easing in the US and Europe has benefited private equity, with rate cuts in 2024 lowering borrowing costs. However, rising yields on 10-year Treasuries suggest inflation risks, which could slow further rate cuts. Interest rate changes directly impact private equity’s ability to finance deals and may affect valuations
Take Home Points
PRIVATE EQUITY FAVORS STRONG CASH FLOW AND SCALABILITY
INTEREST RATES IMPACT DEAL FINANCING AND VALUATIONS
LARGER DEALS ARE INCREASING DESPITE FEWER TRANSACTIONS.
FUNDRAISING STABILIZING, BUT LIQUIDITY REMAINS UNCERTAIN
Q: What are the key trends in private equity deal activity?
While the number of deals declined by 9% in 2024 compared to 2023, the aggregate deal value increased, meaning fewer but larger transactions.
Q: What is happening with private equity fundraising?
Private equity fundraising slowed in Q4 2024, with fewer funds closing and less capital raised. However, fund closures are happening faster, suggesting that fundraising conditions may be stabilizing.
Secondaries fundraising also declined in 2024 compared to 2023, as investors anticipate greater liquidity in the market
Q: What are secondaries in private equity?
Secondaries involve buying and selling existing private equity fund interests. While they were popular in 2023, demand fell in 2024 as investors expected better liquidity in the broader market
Q: What is the outlook for private equity in 2025?
The ongoing rate cycle in the US and Europe is expected to support higher private equity valuations and an increase in deals and exits. North America will remain the dominant private equity market, projected to hold 68% of global AUM by 2029, with Europe accounting for around 20%.
Q: How does the US election impact private equity?
The lead-up to the 2024 election created uncertainty in private capital markets, leading some managers to delay deals. While the immediate election impact has subsided, policy changes from the new administration could influence inflation and interest rates, affecting private equity activity
Q: How has private equity performed recently?
Private equity AUM is forecast to grow to $12 trillion.
Buyout strategies continue to lead performance.
Institutional investors are allocating nearly 20% to alternative assets, with private equity taking a major share
Secondaries vintages are outperforming buyout funds.
Mezzanine debt has the highest returns in private debt.
Q: What should business owners consider when selling to private equity?
Valuations and deal structures are evolving, so understanding how your industry fits into current trends is crucial.
Private equity firms favor businesses with strong cash flow, scalable operations, and clear growth potential.
Given shifting interest rates and M&A conditions, early preparation and strong financials are key to achieving the best deal
JEFFREY VLASIC MANAGING PARTNER