A Look at Private Equity Environment in 2024
Private equity (PE) has a significant effect on companies' financial capability and performance. PE deals inject capital and expertise into businesses, driving economic growth and market efficiency. This article introduces recent private equity deals and their reasoning.
In the first half of 2024, private equity firms are focusing on operational improvements to enhance value amid higher interest rates and geopolitical uncertainties. Worldwide, the number of private equity deals was just over 1,500 in the 1st quarter of 2024. Smaller transactions like carve-outs are preferred over large platform deals, with experienced leadership being crucial.
Looking forward, in 2024 and 2025, PE is likely to seek opportunities from sectors driven by global trends like decarbonization and digitization, which present significant opportunities. Companies with novel solutions in technology and healthcare sectors remain attractive targets.
AI is gaining traction in PE, and companies like Inven are changing how firms optimize deal sourcing and find recent private equity deal data. The adoption of generative AI is also expected to improve portfolio management and due diligence.
Recent Private Equity Deals
Here is a look at 11 impactful PE deals in 2024 so far.
Franklin Templeton’s acquisition of Putnam Investments from Great-West Lifeco, Inc
Deal size: $142 billion
Industry: Financial Services / Insurance
Deal type: Acquisition
Announced date: 01/02/2024
Franklin Templeton has completed the acquisition of Putnam Investments, significantly boosting its assets under management to $1.55 trillion. The acquisition expands Franklin Templeton's insurance assets and broadens its range of investment products and services. This recent PE deal is among the largest of the year so far, and it aligns with Franklin Templeton's growth strategy, expanding its distribution channels and product offerings while leveraging Putnam's strong brand and investment expertise.
Mariner Wealth Advisors acquisition of Fourth Street Performance Partners, Inc and AndCo Consulting
Deal size: $104 billion
Industry: Financial Services / Investment Consulting
Deal type: Acquisition
Announced date: 02/01/2024
Mariner Wealth Advisors announced the acquisition of AndCo Consulting and Fourth Street Performance Partners, firms with a combined $104 billion in assets under advisement. This move is among major PE deals of the year, and it establishes Mariner Institutional, enhancing their services for both institutional and individual clients. The acquisitions aim to drive growth and improve client outcomes while maintaining the firms' teams and locations.
LPL Financial’s acquisition of Atria Wealth Solutions
Deal size: $100 billion
Industry: Financial Services / Wealth Management
Deal type: Acquisition
Announced date: 02/13/2024
LPL Financial has agreed to acquire Atria Wealth Solutions for an initial payment of $805 million, with potential additional earn-outs up to $230 million based on advisor retention rates. This acquisition will add approximately 2,400 advisors and $100 billion in brokerage and advisory assets to LPL's platform. The deal is expected to close in the second half of 2024, subject to regulatory approvals, with the transition of advisors and assets anticipated to be completed by mid-2025. This move significantly enhances LPL's scale and capacity in the wealth management sector, integrating Atria's extensive network of broker-dealers and financial professionals.
General Atlantic acquisition of ACTIS Insulation
Deal size: $96 billion
Industry: Financial Services / Infrastructure Investment
Deal type: Acquisition
Announced date: 01/17/2024
Growth equity investor General Atlantic is set to acquire sustainable infrastructure investor Actis, creating a combined investment platform with approximately $96 billion in assets under management. Actis, which manages around $12.5 billion, will become growth equity investor General Atlantic's sustainable infrastructure arm. One of the largest recent private equity deals, this acquisition enhances General Atlantic’s focus on sustainability and infrastructure investments, including stakes in data centers and energy projects, aligning with key themes like energy and digital transitions.
Platinum Equity’s acquisition of Horizon Organic and Wallaby
Deal size: $68 billion
Industry: Food and Beverage / Dairy
Deal type: Acquisition
Announced date: 01/08/2024
Platinum Equity has agreed to acquire Horizon Organic and Wallaby from Danone. Horizon Organic, the largest USDA-certified organic dairy brand, and Wallaby, known for its Greek-style yogurt, will benefit from Platinum Equity’s expertise in managing global businesses. This acquisition, pending regulatory approval, aims to enhance Horizon Organic's growth as an independent entity, leveraging Platinum Equity's experience in the food and beverage sector to drive further expansion and innovation.
Capital One’s acquisition of Discover Financial Services
Deal size: $35.3 billion
Industry: Financial Services / Banking and Payments
Deal type: Acquisition
Announced date: 02/13/2024
Capital One has agreed to acquire Discover Financial Services in an all-stock transaction valued at $35.3 billion. Discover shareholders will receive 1.0192 Capital One shares for each Discover share, representing a 26.6% premium. The acquisition aims to create a global payments platform by combining Discover's extensive merchant network with Capital One's technology and customer base. The private equity deal is expected to close in late 2024 or early 2025, and will result in Capital One shareholders owning 60% and Discover shareholders owning 40% of the combined company.
MSC Group acquisition of Certane Corporate Trust
Deal size: $20.4 billion
Industry: Financial Services / Corporate Trust Services
Deal type: Acquisition
Announced date: 01/23/2024
MSC Group has acquired Certane Corporate Trust, previously known as AET Corporate Trust and part of Australian Executor Trustees, to create one of Australia's largest corporate trust businesses. The private equity deal, finalized on January 12, 2024, adds retail custody and enhances MSC’s services in debt capital markets, security trusteeship, and employee share plans. The acquisition expands MSC's footprint in Melbourne and Sydney, positioning it as a significant alternative to established players in the Australian trustee market.
BlackRock’s acquisition of Global Infrastructure Partners (GIP)
Deal size: $18.6 billion
Industry: Financial Services / Infrastructure Investment
Deal type: Acquisition
Announced date: 01/18/2024
BlackRock has acquired Global Infrastructure Partners (GIP) in a deal worth $18.6 billion. The acquisition involves $3 billion in cash and 12 million BlackRock shares, focusing on GIP's infrastructure projects, including major assets like the Port of Melbourne, Port of Brisbane, and Sydney Airport. The recent acquisition enhances BlackRock’s is adding over $100 billion in assets under management from GIP and integrating five of GIP's founding partners into BlackRock's operations.
Home Depot’s acquisition of SRS Distribution from Leonard Green & Partners and Berkshire Partners
Deal size: $18.25 billion
Industry: Retail / Building Materials
Deal type: Exit / Acquisition
Announced date: 03/28/2024
Home Depot announced its acquisition of SRS Distribution, a Texas-based building product distributor, from Leonard Green & Partners and Berkshire Partners for $18.25 billion. This transaction, one of the largest private equity exits in U.S. history, marks a significant return on investment for Leonard Green, which originally purchased SRS for over $3 billion in 2018.
Barclays Bank UK’s acquisition of Tesco Bank
Deal size: $18.3 billion
Industry: Financial Services / Retail Banking
Deal type: Acquisition
Announced date: 02/09/2024
Barclays Bank UK PLC has acquired Tesco Bank, forming an exclusive long-term partnership to offer Tesco-branded financial products, including credit cards, personal loans, and deposits. The recent acquisition involves Tesco divesting £7.7 billion in assets and £6.7 billion in liabilities, aiming to streamline its operations and focus on core retail growth. The deal, expected to complete in the second half of 2024, will transfer approximately 2,800 Tesco employees to Barclays, enhancing Barclays' market presence and customer base while leveraging synergies between the two entities.
Deutsche Bahn's sale of DB Schenker
Deal size: $16.2 billion
Industry: Transport / Logistics services
Deal type: Auction/Privatisation
Announced date: 12/19/2023
German rail operator Deutsche Bahn plans to sell its logistics subsidiary, DB Schenker, by the end of 2024 to reduce its substantial debt of over €30 billion. Schenker, a significant profit driver for Deutsche Bahn, is expected to attract bids ranging from €12 billion to €15 billion from various logistics and financial companies, including DSV, Maersk, Bain, and private equity Carlyle. The sale process will begin with initial offers due by the end of March and is aimed to be finalized in 2025.
How to Find All Recent Private Equity Deals?
Traditionally, PE firms have found information about recent private equity (PE) deals through financial news websites, industry reports, and databases such as PitchBook and Preqin, which track detailed information on private equity transactions. Additionally, press releases, financial analysts' reports, and industry publications have provided insights and updates on recent deals.
New generation of AI based tools, like Inven, make it easy to find all PE deals in any niche. Instead of using time to analyze multiple news sources and databases, investment professionals can find deals from any source with the tool’s AI search function.
Inven accurately finds deals from any niche and combines them into easily exportable lists. The search function includes filters to search deals based on deal type, size, investor type, or advisor. It also includes functions to narrow the search by target company keywords, example companies, operational location, and size.
Deal search is used to also find acquisition targets globally from any market.
Private Equity Deals: Outlook 2024
Despite macroeconomic headwinds in 2023, which saw a decline in fundraising and performance below historical averages, private markets assets under management continued to grow towards 2024. As we look ahead to the second half of 2024, the PE landscape is adapting to new economic realities. Value creation through operational improvements will be essential for driving EBITDA and profitability. Although higher debt costs pose a challenge, they are manageable with strategic planning.
The PE sector is experiencing a broader opportunity set as the public markets shrink. Companies in the middle market, in particular, may see a broader range of exit opportunities due to increasing capital from private investors. Middle-market companies, especially those that have plans for operational improvements, will continue to attract investment and secure financing despite the higher cost of debt. Middle-market PEs, focusing on operational enhancements and growth-driven acquisitions, should find ample opportunities despite muted capital markets activity.
Over the past decade, PE thrived on low interest rates and multiple expansions, but these factors can no longer be relied upon as heavily. The focus now shifts to enhancing operations to drive profitability. The higher cost of debt can be mitigated by boosting EBITDA or by paying a lower multiple at entry.
In 2024, the PE industry is increasingly focusing on technology and healthcare sectors, driven by their robust growth and innovation potential. According to a recent report by Bain & Company, "Tech investments are leading the charge, driven by advancements in AI and digital transformation." Similarly, McKinsey notes that healthcare remains a key focus due to the growing demand for new solutions. In 2024, private equity (PE) in healthcare is seeing a rise in carve-outs as organizations divest non-core units, attracting PE interest in profitable segments. Public-to-private deals are also increasing, driven by reduced valuations and strong value creation opportunities for PE firms.
PE activity is surging in the environmental, social, and governance (ESG) space, driven by new climate-related reporting regulations. Recent data indicates a 370% increase in ESG deal volume, highlighting the sector's rapid growth. Firms like Blackstone and Apex are leading acquisitions, focusing on sustainability and carbon impact. This trend underscores the critical role of ESG considerations in shaping future PE investments and fundraising.
Valuations for well-managed, appropriately leveraged assets with growing EBITDA are likely to remain robust. Flexible exit options, including strategic sales and secondary sales through single asset extension vehicles, are becoming more prevalent.
PE Investments Drive Portfolio Company Growth
The medium to long-term support from PE firms allows companies to pursue more sustainable and ambitious growth strategies, beyond the short-term outlook of public markets. Investments by PE firms ensure companies have the resources needed to develop their operations and enhance their competitiveness. In addition, PE firms bring in professionals with industry-specific expertise. Their management practices and strategic insights help portfolio companies achieve operational excellence and long-term growth.
PE firms have significant influence in their portfolio company success in the market. The evidence from tailored value creation plans for PE portfolio companies shows that PE firms tend to select companies that can outperform similar companies in the market. However, PE firms are able to improve portfolio companies’ operations and performance by supporting their investments and acquisitions, and influencing their sales and market share. However, PE firms tend not to utilize means of financial engineering and cash management. Successful execution of PE value creation plans will outperform the returnboosting effects of successful stock picking in terms of returns. This is evident especially in growth, buyout, and secondary deals. The changes are able to yield higher value for the PE firms during exit. (Biesinger, Bircan & Ljungqvist, 2023.)
PE-backed buy-and-build (B&B) strategies, which include scaling up a platform company through smaller add-on acquisitions, can be a way to build sustainable growth and higher value for investors. Literature suggests that B&B strategies have higher internal rates of returns (IRRs) than PE-backed non-B&B buyouts due to higher sales growth and multiple expansion during the holding period. (Hammer et al., 2022.)
Looking Ahead: Insights from 2024 PE Deals
The landscape of recent PE deals in the first half of 2024 highlights positive development as compared to H2 2023. PE activity in H1 of 2024 has included several major acquisitions in the financial services industry as well as smaller transactions in various industries. Strategic acquisitions in sectors such as technology, healthcare, and sustainable infrastructure keep the deal landscape active amid economic uncertainties. The current market situation underscores the need for firms to seek acquisition targets with innovative solutions, capabilities, and adaptive strategies. In addition, integrating AI based tools into deal sourcing and portfolio management is crucial for PE forerunners.
References
Biesinger, M., Bircan, Ç. & Ljungqvist, A. (2023). Value Creation in Private Equity. EBRD Working Paper No. 242, Swedish House of Finance Research Paper No. 20-17, Available at SSRN: https://ssrn.com/abstract=3607996 or
Hammer, B., Marcotty-Dehm, N., Schweizer, D. & Schwetzler, B. (2022). Pricing and value creation in private equity-backed buy-and-build strategies. Journal of Corporate Finance. Volume 77 (102285).
Morgan Stanley. (2024). 2024 Outlook: Private Equity, December 31, 2023.
McKinsey. Global Private Markets Review 2024: Private markets in a slower era. March 28, 2024 | Report
Bain & Company. Global Private Equity: Standing up to the challenge. Report 2024.
McKinsey. 2024 healthcare services outlook: Challenges and opportunities. December 19, 2023 | Article.
Ion Analytics. ESG deal and capital raising activity heats up amid climate-related reporting rule changes. 13th June 2024.
