PE Sells Best Assets First in Exit Value Revival (PitchBook) 

‍The value of PE exits for Q3 has grown by an estimated 50.5% year-over-year, according to PitchBook’s latest US PE Breakdown. 

The majority were the result of buyout firms fulfilling liquidity obligations to their LPs, or selling assets guaranteed to grow in any market environment, according to Paul Aversano, head of the global transaction advisory group at consultant Alvarez & Marsal. 

By the end of September, sponsor-to-sponsor exits surpassed the pre-pandemic average for the first time in nine quarters, according to PitchBook data. 

“Either people have to transact for a variety of reasons, or they have such a good asset, it’s not worth holding on to,” said Aversano.   

Aversano said many of his larger PE clients are also buying themselves time on their bets that aren’t quite ready to come to market by selling minority stakes in their holdings to generate liquidity for investors. 

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Era of Private Credit Returns Beating Private Equity Is Nearing an End (Bloomberg)

Returns from direct lenders beat their private equity counterparts in the second quarter, according to data compiled by State Street Corp. 

 “I expect the private debt outperformance will begin” reversing after the Federal Reserve began cutting interest rates, said Nan Zhang, head of product implementation and alternative investment research at the asset manager. “Private debt, especially floating-rate debt, typically benefits from rising interest rates.” 

 “Even as public market spreads have come in, we have been able to earn double-digit returns in senior credit strategies across both corporate and asset-backed finance year-to-date, using our scale and structuring capabilities to originate assets that offer excess return,” said Tristram Leach, co-head of European credit at Apollo Global Management Inc. 

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Technology Leads the M&A Recovery Charge (PitchBook) 

‍Now that the U.S. election is decided, M&A activity is expected to accelerate—and technology is leading the pack. The sector led a deal recovery in Q3 as interest rates eased and tech stocks rallied. 

The total quarterly value of global tech M&A deals rose to $220.6 billion, marking a roughly 60% jump from Q3 last year, according to PitchBook’s Q3 2024 Global M&A Report. 

This boosted the three-quarter total—including deals reported late and those with undisclosed values—to an estimated $613.4 billion, a nearly 62% surge from the same period in 2023. 

Both PE sponsors and corporate acquirers have been active in the tech space. The report shows that, in Q3, PE firms inked six of the 10 largest tech acquisitions. This contrasts with Q1, in which corporate-backed M&A held all 10 spots. 

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Ivy League Endowments Struggle with Private Market Downturn (Financial Times) 

‍Six of the eight Ivy League universities reported returns in the 12 months ended June that stood below the higher education average of 10.3%, according to Cambridge Associates (CA).  

Yale and Princeton fared the worst by respectively yielding 5.7% and 3.9%. 

Most Ivy League endowments had earmarked more than 30%, and in the case of Yale and Princeton at least 40% of their assets to PE and VC by the first half of this year. In contrast, a survey of 121 university endowments by CA found their allocation to PE and VC had averaged 22% over the same period. 

Britt Harris, former chief investment officer of the $78bn University of Texas/Texas A&M Investment Management Company, said it was “a huge anomaly” for most Ivy League endowments to generate negative or low single-digit returns last year when the risk-free 10-year US treasury yielded more than 4%.  

“People underestimate how volatile some of these private investments can be,” Harris said. 

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Corporate Buyers Maintain an Advantage in Upcoming M&A Recovery (PitchBook) 

‍Over the past two years, corporate-led deals have claimed a growing share of global M&A dealmaking as PE has struggled to regain its position. 

PE’s share of total M&A deal count slipped from a record 36.4% in 2021 to 33.5% in 2023. Its portion of deal value declined from 44.9% in 2022 to 39.8% in 2023. 

Headwinds to PE dealmaking appear to persist. GPs’ dry powder is shrinking amid a tepid exit environment and a slowing fundraising market, while corporate buyers have maintained liberal cash reserves. 

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2025 Global Private Equity Outlook (Dechert-Mergermarket Survey) 

‍Law firm Dechert and M&A data intelligence group Mergermarket released annual report with insights based on a survey of 100 senior-level private equity executives across North America, EMEA and APAC. 

Key findings:  

• 60% of respondents globally now offer a co-investment program; in North America, 73% of firms offer co-investments. 
• 34% of respondents are exploring GP-stake divestitures in the next two years. 
• 82% of respondents expect secondaries activity levels to remain buoyant or increase in the next two years following 4x growth in the past five years. 
• 68% of private equity managers believe market conditions for exits and other liquidity events will be unfavorable over the next 12 months. 
• 31% of North American respondents believe that the Republican victory in November’s U.S. presidential election has the potential to boost portfolios, particularly for North American firms.
  

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Appetite for Risk Among Family Offices Expected to Increase (Chief Investment Officer)

‍According to Ocorian’s global survey on key themes and strategies facing Family Offices, approximately 82% of family office professionals think their firm’s appetite for investment risk will increase, including 12% who said it will dramatically increase.

Of those who said investment risk appetite will increase, approximately 62% noted that increased regulation of ‘riskier assets’ is the main reason for that heightened risk tolerance.

Survey respondents unanimously (99%) said that increasing investments to alternative asset classes from family offices is a long-term trend. Two areas in which some family offices expect the highest allocation increases are infrastructure and private debt.

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What LPs Want from Emerging Managers Now (Buyouts)

‍If private equity fundraising rebounds next year, as is widely expected, how can new GPs give themselves the best chance of success?

To maximize their chances of securing commitments in today’s challenging environment, emerging GPs should be able to offer alignment, differentiation, attributable track record and strong theme or sector focus, according to LPs and industry service providers.

The top three considerations for LPs investing in an emerging PE manager are attributable track record, strategy, and team structure and pedigree, according to a survey published in October by fundraising advisory firm Rede Partners.

High track record bar -- Around seven in 10 LPs (68%) want to see a minimum of three round trip exits done by an emerging GP before they invest, according to Rede’s recent survey.

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