Private equity has over $2.5 trillion of dry powder waiting to invest, plus even more investments waiting to be sold

The private equity industry carried a record level of ‘dry power’ into the new year, which some investors might translate into boosting prospects for M&A as interest rates start to retreat. 

This could include swoops for unloved UK stocks and so-called corporate carve-outs, where large companies sell an unwanted subsidiary or non-core line of business.

 A whopping US$2.59 trillion in cash was available for investment by PE firms in the week before Christmas, according to S&P Global Market Intelligence.

Over 20% of the funds are controlled by the largest buyout groups, according to the Financial Times, which first published the data. The largest firms include the likes of Blackstone, KKR, Apollo, Carlyle Group, CVC Capital, Warburg Pincus, Brookfield, Bain Capital and Advent International.

Get the week’s top news delivered directly to your inbox – Sign up for our newsletter

Sign up

The number of transactions by PE firms in 2023 sank to almost the lowest in a decade, data from Bain cited by the newspaper showed.

Exits for the buyout companies dried up amid rising interest rates and toppling valuations, with the flow of initial public offers shrinking and almost drying up completely in markets such as London.

 As such, there is US$2.8 trillion worth of what Bain calls a “a towering backlog” of unsold investments.

With interest rates expected to be cut in 2024, notably by the US Federal Reserve, many of these might come to market – though not perhaps at the steepling valuations seen in 2021 and before. 

 

Source: Proactive Investors

Can’t stop reading? Read more