Private equity activity resurged in 2024, fueled by anticipated and actual interest rate cuts. We anticipate a more transactionfriendly administration in the United States and demand pent-up over the last 18 months should contribute to a healthy market as sponsors seek to deploy accumulated dry powder, particularly as quality assets enter the market. Global M&A activity remains heavily impacted, however, by macroeconomic uncertainties, military conflicts, geopolitical events, and domestic economic slowdowns. Highlights from 2024 and outlooks for 2025 include:36 Increase in Tech and Healthcare Deals PE showed increased interest in targets with strong growth metrics in the tech and healthcare sectors, particularly targets in both sectors focused on advancements in AI technology. Moving into 2025, we expect the increased interest in these areas to continue, with investment theses fueled by continued AI innovation. Take-Privates Hold Steady The PE-backed takeprivate trend held steady in 2024, given more attractive valuations, higher compliance and corporate governance costs of remaining public, and the abundance of dry 36 For further trends and outlook for the PE market, see MoFo’s client alert, “Global PE Trends 2024 and Outlook for 2025,” Dec. 19, 2024. 37 For regular updates on ESG and sustainability, including their applicability to impact investing, visit MoFo’s ESG and Sustainability Resource Center. powder held by PE firms. In 2025, we anticipate the trend will continue in multiple international jurisdictions. Common challenges will continue into 2025, including the heightened risk of losing the deal at the last moment to a bidder with a superior offer, particularly at a time when strategic acquirors are expected to become more active. Increasing Sustainability and Related Regulations 2024 saw an increased backlash against ESG initiatives, and we expect that the cultural and legal push and pull surrounding ESG will continue into 2025. However, significant legislation passed in the EU will impact not just companies with significant operations in the EU but also their customers, suppliers, and partners, including many, if not most, PE portfolio companies and should propel sustainability ahead in the market. The administration change in the United States will offer a less friendly regulatory environment for ESG investing and related corporate initiatives, but states like California will continue to push forward with regulations that track Europe and much of the rest of the world. Cybersecurity, privacy and climate risks, and other risks within the ESG orbit, as well as compliance with expanding regulations, will continue to be the subject of diligence and assessment.37 Debt Financing Innovations In 2024, competition from non-bank lenders to provide financing to PE continued to increase. The evolving dynamics between banks and direct lenders, including joint ventures between them, underscored a trend toward diverse capital structures, enabling sponsors to remain agile and innovative. In 2025, we expect that deal volume will increase for both bank and private credit lenders. Shifting Regulatory Environment In 2024, like other serial buyers, PE sponsors faced increased antitrust scrutiny at the U.S. federal level. In particular, “rollup” or “aggregator” strategies proved an easy target, though not all enforcement actions withstood objection—e.g., Welsh Carson won dismissal of the claim in connection with its investment in U.S. Anesthesia Partners. While a more lenient regulatory environment for M&A activity is expected at the federal level in the United States in 2025 (as noted above in the discussion of antitrust policies), at the state level, regulatory authorities are expected to continue aggressively reviewing private equity “roll-up” and “aggregator” strategies. 9. Rebound in the Global PE Market 2024 M&A Annual Review 19
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