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The Research Pitch |
January 18, 2025
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Presented by Citizens |
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Sneak peek: We'll give a wide release to our 2024 Annual European PE Breakdown in Tuesday's newsletter, but weekend readers can get early access here.
More comp sheets: Our latest guides on public company valuations and financials are now available for Enterprise SaaS, Foodtech, Medtech, and Mobility Tech.
Outlook webinars: Curious about trends to watch in 2025? On Wednesday, our US PE team will discuss their forecast for the year. On Thursday, our London-based analysts will cover EMEA highlights. |
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Economic growth is just one factor driving M&A in 2025
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Explore why M&A sentiment is at a 5-year high and what buyers and sellers are considering. Read the report |
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A year of rebound for US PE—but what lies ahead?
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After a challenging couple of years, PE found its footing in 2024, with deal activity rebounding sharply in the US.
Total deal value rose 19% year over year to $839 billion, while deal count climbed 13%, signaling renewed confidence across sectors. However, the year wasn't without its complexities. A Q4 deceleration hinted at cautious optimism shaping the road ahead.
The overall rebound was driven by several factors: stabilized inflation, lower interest rates, and tighter credit spreads. The technology sector led the charge, with deal value surging 21% YoY.
PE-backed exits also saw significant growth, up 49% YoY in value to $413 billion, as managers prioritized high-quality asset sales to navigate a challenging market environment.
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| A steady rise for US PE exits in 2024. |
Despite these gains, fundraising lagged, with the year likely to close at around $300 billion, including estimates of late-reporting funds, a notable drop from $395 billion in 2023.
What does this mean for 2025?
Favorable conditions appear to be taking shape. Interest rates are expected to be a tailwind, regulatory pressures are likely to ease, and a "risk-on" sentiment is emerging among investors.
Yet macro risks persist. High federal interest payments and potential supply chain disruptions could temper growth, making now an auspicious time to exit aged holdings.
With over 11,800 PE-backed companies in the US—35% of which have been held for five years or longer—the market is primed for heightened deal and exit activity. But as this surge unfolds, understanding the nuances of evolving trends will be key.
Our 2024 Annual US PE Breakdown offers a comprehensive deep dive into the data, including sector-by-sector analysis, insights on deal financing, valuations, and what the year's trends reveal about the future.
For those looking to navigate the shifting PE landscape with confidence, click to download the free report.
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AI is powering deals, but VC has a lot to prove in 2025
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David Solomon recently questioned the need for startups to go public. It's an important theme to discuss and very relevant for the handful of companies that can seemingly raise unlimited private capital.
Public markets haven't been forgiving to startups, and institutional money continues to pour into private markets.
In 2024, AI drove VC deal value, particularly on the back of enormous raises by Databricks, OpenAI, and the rest of the usual suspects. Overall, $209 billion made its way into startups, which was an increase from the year before, despite the overall lack of movement through traditional exit pathways, such as IPOs.
Aggregated deal value can hide falling capital availability for the broader market, though. The 15 deals sized at $1 billion+ in 2024 accounted for $53.5 billion in value, roughly a quarter of the year's total.
For comparison, there were 21 $1 billion+ deals in 2021, but the total of those was $35.1 billion. That's still incredibly high, of course, but at about 10% of the 2021 annual total, nowhere near the concentration of last year.
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| Will 2025 be the year of bigger VC exits? |
Our VC demand-to-supply model continues to show a wide gap between company needs and capital deployment, suggesting that while it's true the top companies are getting funded, the reality is that VC continues to be a difficult market to navigate, given there are more than 58,000 VC-backed companies in the US currently.
The idea that IPOs aren't needed probably doesn't sit well with the pension funds that have put billions to work in VC funds over the past decade, either. As funds age and the RVPI rises, secondary markets have grown to create the distributions needed to support LPs.
At some point, returns must be realized by the majority of startups that aren't part of the select few with unlimited private capital support. Those companies may not have the same choice as the ones in the AI arms race.
For more data and analysis on the state of VC, download our free PitchBook-NVCA Venture Monitor.
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