Deal doing returned in 2024
Suzi Gillespie, the BVCA’s Head of Research provides her perspective on the latest analysis published about the industry’s performance and reflects on what will impact private market conditions in 2025.
2024: a better year than it might have felt at the time
Last year I predicted that deals would bounce back if interest rates stabilised, or even dropped slightly. As a result of the broadly improved macroeconomic environment in 2024, central banks from the Federal Reserve in the US, to the European Central Bank and the Bank of England here in London, rate setters have spent the past twelve months gradually trimming interest rates as they look to balance the need to bear down on inflation while stimulating the economy.
The more benign interest rate environment, coupled with ongoing demand from Limited Partners for liquidity and the need to put capital raised earlier this decade to work has led to a surge in dealmaking. The Bain Global Private Equity Review 2025 finds that global buyout deal investment value is up 37% year on year (excluding add-ons). In Europe, the figures are up 54% vs 2023, and up 5% over last 5 years, only region to have done so. The McKinsey Global Private Markets Report 2025 paints a similar trend: deals are back.
2025: Trump tariffs trigger turbulence
So where are we now? We still live in a world awash with uncertainty – particularly in relation to geopolitical events. The recent announcements of American import tariffs imposed by the current US administration (such as the 25% tariff on steel) have the potential to severely disrupt specific industries and increase inflation across the wider economy.
At the launch webinar for the Bain Global Private Equity report, over 50% of participants thought that macro risks were the greatest challenge facing the private capital industry.
Against this backdrop, the relative political stability in Europe, alongside the economic stimulus from additional defence spending is making Europe (including the UK) a more attractive investment destination – both for global LPs looking to allocate capital, and for GPs looking to deploy it. BVCA members have told us that they are seeing a notable increase in interest from overseas funds over the past couple of months.
The ingredients for success: talent, capital, investment opportunities
The private equity industry is now over 40 years old. It is mature and well established, having doubled in size over the past decade. However, as in all well-functioning markets there is now a vibrant level of competition for talent, for capital, and for the best investment opportunities. The Bain & Co report highlights the importance of these for private equity firms, but they equally well apply to investee companies too. Private equity firms, and their portfolio companies, are focusing on getting the right talent to deliver, raising capital and investing it wisely. There is extensive academic literature into how private equity investors help their portfolio companies build better management teams and raise the right kind of finance to support business investment and growth.
Having specific operational expertise in building better businesses is going to be key for GPs wishing to stand out from the crowd as a long-term partner – both to LPs looking to make commitments and management teams seeking investment. Firms which can do this, and navigate the challenges and uncertainties in today’s world will be the ones to thrive.
Authored by Suzi Gillespie
Head of Research, BVCA
