Transaction trends and EBITDA multiples in early 2024 suggest a market that is entering recovery. However, with the current elevated number of long-held assets, liquidity generation remains a key challenge for private equity.

The liquidity crunch has triggered a change in investor focus, away from Internal Rate of Return (IRR) toward Distribution to Paid-In Capital (DPI). Private equity firms must now work to triangulate improvements in DPI, IRR and EBITDA multiples.

These trends have caused accelerated growth in the secondaries market, particularly continuation funds. However, whilst continuation vehicles provide a solution to Limited Partner liquidity challenges, they delay carry and reset hold periods for another four to five years.

Private equity firms must recalibrate their approach. Exit discussions should be initiated from Day 1 and value creation front-loaded, strengthening the equity story and increasing buy-side confidence in the transaction process.

Our latest white paper “Exit Readiness” is a must-read for private equity professionals. It provides actionable insights on how to navigate the new complexities of exit planning, building buy-side confidence and maximising returns.

Our multi-disciplinary teams have extensive experience across industries and situations optimising portfolio companies under private equity ownership. To see how we can help you go to PE services.