A majority of companies in the U.S. would consider taking an investment from private equity in 2024 and beyond, according to a new survey. That could be a positive signal for future dealmaking.
A year ago, private equity executives anticipated that the coming months would be tough for their firms — and they have been. Higher interest rates and the threat of a recession have stalled the market; deal value and count have plummeted 60 and 30 percent, respectively, and the private equity industry is still sitting on more than $2.5 trillion of dry powder.
Seventy-two percent of small- and mid-size U.S. businesses view the private equity industry as a source of current or future funding, according to a survey of more than 530 decision makers at these companies earlier this year by Citizens Financial Group. The results are a little more affirmation that the frozen PE market is thawing. In Citizens’ 2024 M&A outlook report, sponsors said they expected to do more deals this year and that overall volume would be up from 2023.
“With $2.5 trillion of private equity dry powder on the sidelines, elevated buyer enthusiasm and a positive perception of sponsors should support a constructive environment for dealmaking,” Don McCree, vice chair and head of commercial banking at Citizens, said in a statement. The deal landscape is evolving, McCree said, and his group is working closely with companies and private equity clients to navigate it and get transactions to happen. Private equity firms are a growing client base for Citizens, which has been expanding its capital markets and wealth management business, the company said.
Some increasing activity involving small- and mid-size companies could also be good for investors. Smaller private equity funds target these companies and tend to outperform their larger peers.
Forty-five percent of the decision makers surveyed by Citizens also said that inflation will be more concerning in 2024 compared to last year. Respondents also said they are ready to hire; 61 percent expect their companies will add employees in 2024 and 40 percent anticipate hiring more people than last year.
Business owners aren’t shaken by the coming U.S. presidential election. Only 9 percent of respondents expect the election cycle to have a negative impact on their growth plans for 2024 (64 percent actually said it will have a positive impact on business growth).
Less than 40 percent of small- and mid-size business leaders expect geopolitical issues to pose a serious threat to their company’s financial performance in 2024 — an attitude in conflict with their worries about supply chain disruptions. Over a third of decision-makers were more concerned about the impact of supply chain disruptions in 2024 compared to last year. Only 11 percent of the executives were less concerned than they were the year before.