2024年全球私募股权投资展望分析报告

ContentsMethodology34Introduction:Review,

recalibrate,renewKeyfindings6Fundtrends8Dealenvironment:ChallengesandchangedprocessesRegulatoryscrutiny12172022262832343640465052NorthAmericaspotlightPrivatecreditEMEAspotlightDealtrendsBuy-and-buildAPAC

spotlightArtificialintelligenceESG:AdoptioncontinuesamidpoliticalpushbackLiquidityevents:SwimmingwiththecurrentGP-stakedivestituresConclusionMethodologyInQ22023,Mergermarket,onbehalfofDechertLLP,

surveyed100senior-levelexecutiveswithinprivateequityfirmsbasedinNorthAmerica(45%),Europe,theMiddleEast&

Africa(EMEA)(35%)andAsia-Pacific(APAC)(20%).To

qualifyforinclusion,thefirmsneededtohaveUS$1billionormoreinassetsundermanagement(AUM)andrespondentscouldnotbefirst-timefundmanagers.Thesurveyincludeda

combinationofqualitativeandquantitativequestions,andallinterviewswereconductedoverthetelephonebyappointment.ResultswereanalyzedandcollatedbyMergermarket,andallresponsesareanonymizedandpresentedinaggregate.3Introduction:Review,recalibrate,renewTheglobalprivateequity(PE)markethassettledintoa

moremeasuredcadenceinrecentquarters.Fundmanagershavebeensteeringthrougha

fundamentallydifferentenvironmentthantheonetheyhadbecomeaccustomedforthelast15years.deals,andQ2ofthatyearwasamongthetopsixquarters,allofwhichoccurredpost-pandemic.Total

transactionvalue,meanwhile,hastakena

sharpdive,fallingby45%comparedwithQ1-Q32022,toUS$448billion.NUMBER

OF

GLOBAL

BUYOUT

DEALS,

2018–Q3

202312,00010,0008,0006,0004,0002,00002,2532,4411,4252,7882,2621,6232,3419332,9031,0559921,0419589521,0231,0099261,6782,1592,0601,1837199473,46920222,3402023WhilethisdropinaggregateIn2022,centralbankpolicytightenedconsiderablytotackleinflation,andtheseconditionsposeseverechallengesforthePEindustry.

Higherinterestvaluehasbeenmoreprecipitousthanthedeclineinvolume,andreflectsmarkedlytighterdebtfinancingconditions,themarkethasessentiallyrecalibratedtoits201820192020Q22021Q1Q3Q4rateshavesignificantlyimpacted

pre-pandemicbaselinefollowingVALUE

OF

GLOBAL

BUYOUT

DEALS,

2018–Q3

2023dealeconomicsandthereforetransactionactivity.

Lowerdistributionsfromfewerexitsare

recordedinQ32023representsalso

straining

fundraising

efforts.

a

decreaseof6%onQ2’sUS$154.4billion.Thiswasa

freneticcoupleofyears.TheUS$145.3billionintotalvalue1,600$387.01,200$426.7$158.68004000GlobalPEdealvolumewasdownby28%year-on-year

inQ1-Q32023to6,304deals.Thisdeclineisnotasdramaticasitfirstappears.Q12022wasthemostabundantquarteronMergermarketrecordforPEprecipitatedbya

declineindealcountinQ3,afterhavingheldsteadythroughH1.$166.1$465.0$129.0$138.9$153.6$136.7$180.9$121.6$235.8$297.1$145.3$154.4$148.0$163.5$98.8$141.4$180.7$140.0$364.02021$347.82022Whileitisnotyetclearifthismarksa

bottomingofPEdealvalue,ourresearchindicates201820192020Q22023Q1Q3Q44thatGPsaregreatlyconcernedbytoday’s

high-rateenvironmentanditsimpactontheirabilitytoclosenewdealsoverthenext12months.InAPAC,

fundmanagersarecomparativelyoptimistic,buoyedbytheregion’s

strongereconomicoutperformanceandtheoursurveyrespondents,whoareconcernedaboutcommitmentsflowingtootherfunds,withkeyinvestorsdownsizingtheirticketsandconsolidatingtheirGPrelationships.Nevertheless,drypowdersuppliesremainvast.Preqinestimatesthatthereisstilla

nearall-timehighofUS$1.2trillionstilltobedeployed.promiseofbuildingbetter,

moreprosperousbusinesses.Thisextendstoenvironmental,social&

governance(ESG)considerations,whichcontinuetogaintractionacrosstheindustry,

inspiteofrecentpartisanpushbackemanatingfromtheU.S.ESGisa

primaryvalueleverfordrivingcompanyperformance.Promotingpowerfuldemographictailwindsunderpinningitsimmenselong-termpotential.FirmsareincreasinglyandembeddingmeasurablesustainabilitystrategiesandpracticeswillensurethatGPscancapitalizeontheeventualThefirstninemonthsofbroadeningtheirhorizons,addingnewstrategiessuchasprivatecredit,infrastructure,2023featureda

slowdowninfundraisingintheU.S.Thetotalcapitalraisedbyclosedfundswasdown12.9%comparedwiththesameperiodin2022,accordingtoPitchbook.HeadlinefundraisingfaredbetterinEurope,with€86billionraisedasofend-September,

upfrom€76.1billionacross2022asa

whole.This,however,

speaksinlargeparttotheconcentrationinfundraising,withthethreebiggestfundsinEuropeventurecapital,impactinvesting

recoveryoftheexitmarket,andhedgefundcapabilitiestotheiroperations,astheyrealizetheirambitionsofbecomingmulti-strategyassetmanagementfirmstocompeteeffectivelyinthecurrentmaximizingLPreturns.MostPEfirms,includingthoseintheU.S.,arecognizantofthisrealityandmajorLPsinredstatesarecommittedtosomeoftheindustry’s

largestimpactfunds.market.OnthePEside,theyarealsoembracingcreativedealstructuresthatsatisfyalldealpartiestoclosethevaluationgapbetweenbuyerandseller.Thefollowingannualreport,producedinpartnershipwithMergermarket,isnowinitssixthedition,overwhichtimethePEindustryhasbeenthroughoneofthemostvolatileperiodsinitshistory.

ThepurposeofthislatestissueistodeterminehowPEmanagersareovercomingtoday’s

challengesandsettingthemselvesupforsuccessamiddemandingmarketconditionsandindustryshifts.Thisisnotthefirsttesttheindustryhasfacedanditwon’tbethelast.PEmanagersarehighlytenaciousandthesuccessfuloneshaveevolvedthroughmultiplecyclestobecomemoredynamicstewardsofinvestors’capital.Thistimeisnodifferent.representing57.7%offundsraisedthroughQ32023.Overthelastdecade,thetopthree’sshareoffundraisinghasneverexceededeven36%.ThisisyetfurtherevidencethatPEfundsaresomeofthemostadaptiveinvestors.With

EBITDAmultipleshavingadjustedsomewhatlowerthrough2022and2023comparedwithpreviousyearsandprofitmarginsunderpressure,fundsaredoublingdownonvaluecreationintheirportfoliocompanies.Firmswithbonafideoperationalprowessandstrategicvisionarepositionedtoexcelintheseconditions;ifanything,theyarea

testoffirms’abilitytodeliverontheirNotonlyisdebtfinancinghardertosecureonfavorableterms,butthereisalsolessnewequityenteringthesystemforinvestments.A

lackofexitshascauseddistributionstoslow,

leavingLPswithlesscashtorecycleintonewfunds.CompetitionforcapitalamongGPsisfierce,a

realityflaggedby5Keyfindings26%

58%ofrespondents,thelargestshare,believethatinterestrateswillhavethesinglebiggestimpactonthedealenvironmentoverthenext12months.ofrespondentsseemarketconditionsforexitsasbeingeitherneutralorsomewhatfavorableoverthenext12months,suggestingGPsareconfidentinarecoverybutremainrealistic.Thisisamarkeddeclinefrom84%whosharedthisviewayearago.35%

9

4%RespondingtotheU.S.regionalbankcrisisearlierthisyear,

35%ofrespondentsintendtomovemoretowardsprivatecreditproviders,atrendvisibleacrossallpartsoftheworld.ofrespondentssaytheyarelikelytoconsiderpursuingtake-privatesatpresent,amarkeddeparturefromlastyear’s

editionofthissurveywhenlessthanhalfsaidtheywerelikelytodoso.92%

71%ofGPssaythatutilizingearn-outsisastrategytheirfirmsareemployingtomanagethevaluationgapthatemergedlastyearinresponsetomacroandmarketconditions.ofrespondentsexpectrisingscrutinyfromantitrustauthoritiestohaveanegativeimpact(46%)orsignificantnegativeimpact(25%)ontheirdealmakingplansoverthenext12months.678%

2

1%ofrespondentssaytheirfundmakesuseofprivatecreditforacquisitionfinancingattheportfolioleveland73%ofthosewhosefirmsdonotalreadyhaveaprivatecreditinvestmentstrategyareconsideringaddingonetotheiroffering.ofGPscitecompetingwithlargermanagersforcapitalastheirchieffundraisingconcern.However,only21%ofrespondentsseedirectaccesstoPEvehiclesexpandingtoretailinvestors.91%

59%ofrespondentsbelievethattheofrespondentsareaimingtomakeaGP-stakedemocratizationofPEwillhaveanimpactonfeestructuring,asretailinvestorsgainfurtheraccesstotheassetclass.divestitureoverthenext24months,broadlyinlinewiththe63%offirmswhohadsuchplansayearago.78%ofrespondentsexpecttheirfirmstoinvestinhedgefundcapabilitiesoverthenext12months,aslargermanagers72

%ofrespondentsoverallexpecttoseemoredistresseddealsinresponsetotoday’sstrivetobecomemulti-assetmanagementfirmsthatareabletotakeadvantageofahigherinterestrateenvironment.prevailingmacroeconomicconditions,upfivepercentagepointsonlastyear’s

survey.26%ofEMEArespondentsviewtheircapacitytosuccessfullyraisecontinuationvehiclesasachallenge,comparedwith20%ofAPAC

andjust13%ofNorthAmericanrespondents.7Fundtrends“Inthechallengedmarketconditionsthatwe’reinrightnow,

LPcommitteeFormany,

thepursuitofraisingfreshcapitalhasbecomemorearduous.MarketheadwindsaresuchthatGPsarehavingtospendlongerontheroadbeforetheyfinallyclosetheirfunds.recentphenomenonistheliquidity

crunch

stemming

fromlowerexitvolumes,meaningLPsarebeingmoreselectiveintheircommitmentdecisions.AlthoughinflationfiguresarePreqindatashowthatin2019,

trendingintherightdirection,

membersaregoingtobeforethepandemicputaaconsiderabledegreeofmacroeconomicuncertaintyremains,meaningthereisarguablymoreincentivethaneverforinvestorstonaturallybeinclinedtocommittolargerwell-establishedfunds.”holdonface-to-facemeetings,theaveragetimefromlaunchtofinalclosewas15months.Sincethen,theaveragetimeis19

months,

towards

the

top

end

takeameasuredapproachofthehistoricalaverage.regardingwhichmanagerstheyarewillingtoback.SabinaComis,DechertLLPConsequently,

GPsareLarge-cap,multi-strategyassetmanagementfirmscontinuetobethebiggestwinnersamidthisconcentrationofcapital.pursuingcreativesolutionstoraiseadditionalcapitalthroughannexfundsorsidecarvehicles,ormakinguseofalternativeliquiditysolutionssuchasGP-ledsecondariesandcontinuationvehicles(seeLiquidityevents,page46).“Inthechallengedmarketconditionsthatwe’reinrightnow,

LPcommitteemembersaregoingtonaturallybeinclinedtocommittolargerwell-establishedfunds.That’swhynewerfundsandthoseraisingforfrontiermarketsareForsometimealreadyLPshavebeenrationalizingtheirGPrelationships.Amore8findingithardernow,

too,”saysSabinaComis,Dechert’s

GlobalManagingPartnerbasedinParis.“ThebigpensionfundsinparticularalsowanttowritelargeticketsandonlyhavesomuchresourcetoconductduediligenceontheuniverseofthousandsofPEfunds,sothere’sa

capitalefficiencyelementthereaswell.”WHAT

IS

THE

BIGGEST

GLOBAL

FUNDRAISING

CHALLENGE

YOUR

FIRM

HAS

FACED?(SELECT

ONE)21%CompetingagainstotherfundsforLPcapital,especiallythelargestand/ormorediversiꢀedGPs15%17%17%27%Securingsmallercommitments(underUS$100million)fromlargeinstitutionalinvestors15%15%20%OurrespondentssharethatthebiggestchallengetheycurrentlyfaceinreplenishingtheirdrypowderiscompetingagainstthelargestandmostdiversifiedGPs,citedby21%overall.ThisisofmostconcernforNorthAmericanrespondents(27%),amarketinwhichinvestorsseekingexposuretotheU.S.arespoiledforchoice.MarqueePEbrandshavecontinuedtheirclimbtothetopofthefundraisingleaderboardoverthepastdecade,benefittingfromtheirvasteconomiesofscale.PerhapsthemostnotableoftheseisBlackstone,whichinJuly2023reachedarecordUS$1trillioninAUM.16%17%LargeLPsconcentratingtheirinvestmentrelationshipsona

smallernumberoffunds30%9%14%14%Thenegativemarketperceptionofa

slowerfundraisingprocess5%18%10%“Retailization”/“Democratization”(i.e.,openingaccesstonewinvestors,includingsmallerorganizationsandindividuals)15%6%11%6%5%6%7%Geopoliticalissues6%5%Current“overallocation”toPEbyLPs9%4%Thesefindingsecholastyear’sresults,when20%ofGPsoverallsharedthisastheirtopfundraisingchallenge.However,inadeparturefromourpreviousreport,when28%pointedtoLPsconcentratingtheirinvestmentrelationshipstoasmallernumberoffundsasatopchallenge,only5%5%LPskepticismsurroundingvaluationsandhealthofpre-pandemicinvestments3%7%5%5%Convincinginvestorstheircapitalwillbeputtoworkquickly8%2%TotalAsia-PaciꢀcEMEANorthAmerica16%nowflagthismanager-9relationshipconsolidationasakeyissue,withAPAC

GPsbeingtheoutlierat30%.PEhaslongbeenoutofthereachofeverydayinvestors.HighcapitaldemandsandilliquiditymeantPEwasnotpartoftheretailinvestor’sportfolio.However,

a

shiftisemergingthathasthepotentialtotransformhowGPsraisecapital.TO

WHAT

EXTENT

DO

YOU

THINK

THERETAILIZATION/DEMOCRATIZATION

OF

PRIVATEEQUITY

WILL

HAVE

AN

IMPACT

ON

FEESTRUCTURING?

(SELECT

ONE)Itappearsthat,onbalance,GPsarelessconcernedaboutlosinglarge,oftencornerstoneinvestorsoutright,butworrythattheseinstitutionalbackersarenowdialingbackontheirticketsizes.Lastyearonly4%highlightedinstitutionalinvestorsdownsizing9%Agreatextent35%AslighttomoderateextentTheretailizationofthealternativeinvestmentsItwillhavenoimpactindustrystemsfroma

middleclassseekingtodiversifytheirassetsandenhancetheirreturns.Firmsareturningtheirattentiontothispreviouslyuntappedreservoirofretailinvestorcapital,creating56%commitmentsasa

topchallenge,andthishasnowrisento17%.Notably,

asmuchas20%ofEMEArespondentsareconcernedbythis,fromaslittleas3%a

yearago.tailoredproductssuchasfeeder

Andthenthere’s

thematterofA

furtherpotentialfundraisingobstacleasofAugust23,2023istheSecuritiesandExchangeCommission’s

(SEC)newprivatefundrules.Amongotherobligations,theserequirethatGPsenhancedisclosuresaroundfees,conflictsofinterestandinvestmentstrategies,andavoidgivinginvestorspreferentialtreatmentthatwouldnegativelyimpactotherLPs.Fundmanagerspreparingtolaunchnewfundsshouldcarryoutariskassessmentbyseekinglegaladviceonwhethertheircurrentprivateplacementmemorandumdocumentsalignwiththeirfunds,tokenizedblockchain-enabledproductsandfunds-of-private-fundsavailabletowealthmanagerchannelsandviadigitalplatformstocapturegrowingdemand.TheseproductstypicallyhavelowerminimuminvestmentthresholdsandmoreliquiditythantraditionalPEfunds,openingthedoortowhatwasoncea

purelyinstitutionalandhigh-net-worthmarket.feecompression.Only9%ofrespondentsbelievethattheretailizationofPEwillhavezeroimpactonfeestructuring.Mostsayitwillhaveanimpacttoamoderateextent(56%),whileasizableminority(35%)expectittohavea

majorimpact.Itisnotyetclearwhereexactlythechipswillland.Lowering

hurdlesAligningtheinterestofinvestorswiththeirfundmanagers

is

a

delicate

balance.Lastyearinthepreviouseditionofthisstudywefoundthat64%ofPEfirmsreportedtheirLPsaskingforhigherGPcommitmentstotheirfunds.Thishassincefallento38%,indicatingthatLPsrecognizetheslowerpaceofexitsmeanslesscashformanagerstore-upintotheirownvehicles.Givenintensecompetitiontoraisefunds,thosewhosuccessfullyseizeuponthisemergingtrendstandtocapturethebiggestamountsofcommitments.However,

thedemocratizationofPEwillnotcomewithoutitschallenges.Forone,managerswillhavetobuildouttheirbackofficestoaccommodatethesechanges.existingpractices,toensurecompliancewiththenewrules.Retail,

a

new

paradigmTraditionally

confinedtoinstitutionalinvestors,familyofficesandtheultra-wealthy,10Themoststrikingreversal,however,ishowinvestorsareviewinghurdlerates,whichforPEaretypicallysetatanindustrystandardofaround8%.Thereceivedwisdomisthatasinterestratesrise,sotooshouldhurdlestoreflecttheperformancePEisexpectedtodeliveroverandaboverisk-freeassets.Butthiscomeswithacatch.IfafundislaggingandGPsareoutofthecarry,

alignmentbecomesskewed,underminingthisvirtuousincentiveforfundmanagerstoeffectivelymanagerisks.WHAT,

IF

ANY,

ACTIONS

HAVE

BEEN

TAKEN

(OR

CONSIDERED)

IN

THE

PAST

12

MONTHSTO

BALANCE

INCENTIVIZATION

WITH

THE

ALIGNMENT

OF

LP

INTERESTS

IN

YOUR

FIRM?(SELECT

ALL

THAT

APPLY)56%SeniorleadershipintheGP45%haveforegonea

portionoftheircarrysplittoattract,retainandincentivizemorejuniorstaff57%60%53%50%We

haveaskedforthehurdleratetobeloweredtoaccountforlowervaluationsandincreasetheteam’s

carryparticipation54%53%Inthisgive-and-take,itcanbebeneficialforLPstoacquiescetoalowerhurdleonanexistingfundtoreincentivizetheGPandavoidthemaddingmoreleverageriskinordertocrosstheperformancethreshold.Onseeingcentralbanksbegintheirhikingcyclesin2022,53%ofGPssaidtheirLPswereinquiringabouthurdlesrising.Ayearonandwithtighterconditionshavingweighedonassetpricesandexittimelines,thishasfallento34%.Now,

53%saytheyarehavingconversationswiththeirinvestorsaboutloweringthehurdle.38%50%LPshaveaskedfora

higherGPcommitmentinnewfunds37%33%34%35%LPshaveaskedforthehurdleratetobeincreasedinlightofrisinginterestrates29%38%TotalAsia-PaciꢀcEMEANorthAmerica11Dealenvironment:ChallengesandchangedprocessesThePEindustryhashadtoreorientitselfamidtheinflationarysqueezeandhighinterestrateenvironmentthathasdefinedthepasttwoyears.ThisconfluenceofmacroeconomicpressuresclearlydominatesGPs’WHAT

DO

YOU

SEE

AS

THE

BIGGEST

CHALLENGES

CURRENTLY

FACING

THE

PRIVATEEQUITY

INDUSTRY?

(SELECT

TOP

TWO)Valuation

uncertaintiesmakingbuyersandsellersreluctanttotransact22%17%Availability

andcostofleverage10%28%amidmonetarytighteningconcernstoday,

astheymanageEBITDAmargincompressionfromraisedinputandlaborcostsononeside,andsignificantlyincreasedborrowingcostsontheother.Whilewearenotoutofthewoodsjustyetandactivityhasfallenfromitsrecordhighs,dealsarestillbeingmadeinvolumesconsistentwiththehistoricaverage.Competitionforlimiteddealsandelevatedmultiples18%16%23%8%Continuedinꢁation14%11%SlowingeconomicgrowthExitinginvestmentsproꢀtablyenoughtoexceedhurdlerate9%11%WhenweinterviewedindustryparticipantsattheendofQ22023,inflationrunninghotwasstillatthetopofRegionorjurisdiction-speciꢀcfactors(e.g.,macroeconomicandgeopoliticalissues)4%9%everybody’smind.Accordingto23%ofrespondents,thelargestsuchshare,thesingleRank1Rank212greatestchallengefacingtheindustryiscontinuedinflation.Thistrendhassinceshownsignsofeasinginsomemarkets,includingtheU.S.,thoughcoreinflationisprovingtobequitepersistent,andmonetaryconditionshavethepotentialtoremaintightforsometime.WHAT

DO

YOU

SEE

AS

THE

BIGGEST

CHALLENGE

CURRENTLY

FACING

THE

PRIVATEEQUITY

INDUSTRY?30%31%Continuedinꢁation13%25%Valuation

uncertaintiesmakingbuyersandsellersreluctanttotransact20%22%15%14%CompetitionforlimiteddealsandelevatedmultiplesHigherratescorrelatewith22%20%lowerassetprices.GPshavethereforehadtocontendwithopposingforces:debtforSlowingeconomicgrowth17%underwritingnewdealsismoreexpensive,whileattractiveexitopportunitieshavebeenhardertocomeby.

ThishasslowedthenaturalinvestmentcycleinPEsincethebeginningof2022asthebid-askspreadbetweenbuyersandsellersstretched.9%9%0%0%Availability

andcostofleverageamidmonetarytightening16%Exitinginvestmentsproꢀtablyenoughtoexceedhurdlerate6%16%10%Regionorjurisdiction-speciꢀcfactors(e.g.,macroeconomicandgeopoliticalissues)Not

far

behind

inflation,

22%

ofrespondentssaythatvaluationuncertainties—makingpartiesreluctanttotransact—istheprimarychallengetheyfaceand17%sayitisa

significantsecondaryhurdle.3%2%Asia-PaciꢀcEMEANorthAmericahavingrecalibratedtheirexpectations.Thisisnotthecaseacrosstheboard.ValuationgapsarestillpronouncedinmanyAsianmarkets.“Indiahasbeendoingexceptionallywellbecauseofaconfluenceoffactors,includingitsstructuralenablers(suchasconsumptiongrowthandpaymentinfrastructure),itsbroadeninginvestorbase,maturingcorporatesystem,andmorepertinentlyintheUnquestionably,2022wasarealitycheckforsellers,andmanywereunwillingtoselltheirassetsamidthemarketdowndraft.DepressedexitactivityhasconsequentlyseenGP-ledsecondariesandinparticularcontinuationvehiclesbecomeago-totoolinsponsors’toolkitforrealizing“Therewasabigvaluationgaplastyear,

andthatdefinitelyhasshrunksincethen,”saysMarkusBolsinger,co-headofDechert’sPEpractice,basedinNewYork.

“There’sbeenarealizationandacceptanceamongsponsorsthattheloftymultiplesofprioryearshaveliquidityforinvestors.However,

comedownanotchortwointherearesignsthatthetablesarebeginningtoturn,sellerstoday’smarket,particularlyintheU.S.”lastyear,

fueledbythe‘ChinaPlusOne’tailwinds,”says13SiewKamBoon,co-headofDechert’sPEgroup,basedinSingapore.“Barringcertainsectorsliketech,whereyouseealotofdownroundsaftersomeastronomicalvaluations,priceexpectationsinAsiahavenotdroppedinasconsiderableafashiondespitethecurrentconditions.Themessageistakingitstimetopercolateandthere’sageneralsentimentamongsellersthatAsia’sIN

YOUR

ESTIMATION,

WHICH

CURRENT

OR

UPCOMING

DEVELOPMENTS

WILL

HAVETHE

BIGGEST

EFFECT

ON

THE

DEAL

ENVIRONMENT

OVER

THE

COMING

12-18

MONTHS?(SELECT

TOP

THREE

AND

RANK

1-2-3,

WHERE

1

IS

THE

GREATEST

EFFECT)IncreasinginterestratesHighercorporateand/orcapitalgainstaxratesRisingportfoliocompanycostsfrominꢀation26%20%9%12%14%15%20%14%5%Supplychainnormalization/emphasison“friendshoring”and“nearshoring”8%9%16%growthstoryshouldsupporttheirvaluationexpectations.”Slowingeconomicgrowth11%11%9%Increasedregulatoryscrutiny(includingforeignHigherinterestratesandrisingdebtburdensareanobviouspainpoint.Notonlyistheavailabilityandcostofleverageamidmonetarytighteningflaggedasa

keyconcernforthePEindustryby38%ofrespondents,26%alsobelieverateswillhavethesinglebiggestimpactonthedealenvironmentoverthenext12months.investmentreviews,antitrustenforcement,

6%EUforeignsubsidiesreviews,etc.)8%16%ESGfactorsinbusiness(e.g.,climatechange,8%6%12%diversity,

governanceissues)Civilunrestandpopulismslowingeconomicgrowthandthepotentialforrecession5%

6%10%Geopoliticalconꢀict,includingUkrainewar

4%11%6%2024USelection2%Theyarealsoconcernedabouttherelatedissueofelevatedportfoliocompanycostsfrominflation,whichgarners20%offirst-choicevotes.Chinaeconomicreopening

1%Rank1Rank2Rank3“Thebiggerworryforourclientbaseisnotinflationperse,it’s

theratehikesthathavefollowedasa

waytocombatthatinflation,”saysChrisField,co-headofDechert’s

PEpracticeandthefirm’s

Londoncorporategroup.“Andhowlongdothoseelevatedratespersist,becauseevenifthey’vereacheda

peakthequestionis,whendotheycomebackdown?”“Barringcertainsectorsliketech,whereyouseealotofdownroundsaftersomeastronomicalvaluations,priceexpectationsinAsiahavenotdroppedinasconsiderableafashiondespitethecurrentconditions.”SiewKamBoon,DechertLLP14Stress

testWHAT

TRENDS

DO

YOU

SEE

GROWING

IN

RESPONSE

TO

THE

CURRENT

ECONOMICDOWNTURN?

(SELECT

ALL

THAT

APPLY)Multi-decadehighratesandslowereconomicgrowthmeanbusinessesarefacingsomeofthestrongestheadwindsofrecenttimes.Refinancingconditionsareextremelytight,and72%ofrespondentsoverallexpecttoseemoredistresseddealsinresponsetotoday’sprevailingmacroeconomicconditions.MoredistresseddealsGreateremphasisonESG72%70%Increaseintake-privatetransactionsMoreclubdeals63%63%Ofcourse,therearevaryingdegreesofstressanddistress.Inthiscapital-constrainedenvironment,manycompaniesfacingliquidityissuesareproactivelyengagingwithlenderstodiscussloomingmaturitydatesandpotentialsolutionstotheircashIncreaseofadd-onacquisitionsforexistingportfoliocompanies61%Moreco-investmentopportunities55%GP-ledsecondaries/fundrestructurings/continuationfundstoextend50%requirements.thelifeofexistingfunds/investmentsManyforecastershadbeenexpectinganavalancheofdistresseddealsamidadefaultwave.Thathasnotcometopass,buttherehasbeenanuptickinbankruptcyprocedures.IntheU.S.,forexample,the4,553Increaseofteamingupwithstrategicpartners44%43%MoresellerreinvestmentopportunitiesAccelerationoffundraising34%commercialChapter11bankruptciesfiledbetweenthestartofthe2023andtheendofQ3representa61%increaseoverthesameperiodin2022,accordingtoEpiqBankruptcy.Thatincludes459corporatefirms,alreadysurpassingthefull-yeartotalsrecordedin2022(373)and2021(408),accordingtoS&PGlobalfigures.Lesstravelandmoreremoteprocesses(e.g.,duediligence)31%Dec