Private equity likely to offer a brighter experience in 2025
Valuations in the global private equity market have stabilized, with an uptick witnessed among sponsor-to-sponsor exits, though a notable valuation gap still exists, with smaller buyouts trading at a significant discount compared to larger ones.
Therefore, we look ahead to 2025 with three themes in mind:
- A focus on the small-mid market
The small and mid-market buyout segments are positioned for growth, demonstrating resilience during volatile periods, providing diversification benefits and allowing for more meaningful return multiples. This segments' performance is not reliant on the stagnant IPO market for premium exits, as successful small or mid-sized businesses become tomorrow's exits as large buyout transactions, where a substantial amount of capital remains available.
2. Following the money to GP-led secondaries
We anticipate GP-led secondaries will be a viable exit path for private equity, particularly in this current exit-challenged market. As more and more dedicated capital is raised for continuation funds, we believe experienced GP-led investors will continue to have attractive opportunities to construct high-quality, well-aligned continuation fund portfolios.
3. Rethink the re-up
The global capital markets have experienced structural changes over the past few years; inflation, interest rates and geopolitical tensions have created a different market dynamic. Investors are at risk if they approach private equity with their historical approach to building private equity portfolios. Instead, new capital deployment should be evaluated for its suitability and merit in the new world order.
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Schroder Investment Management North America Inc. (“SIMNA”) is an SEC registered investment adviser, CRD Number 105820, providing asset management products and services to clients in the US and registered as a Portfolio Manager with the securities regulatory authorities in Canada. Schroder Fund Advisors LLC (“SFA”) is a wholly-owned subsidiary of SIMNA Inc. and is registered as a limited purpose broker-dealer with FINRA and as an Exempt Market Dealer with the securities regulatory authorities in Canada. SFA markets certain investment vehicles for which other Schroders entities are investment advisers.
Schroders Capital is the private markets investment division of Schroders plc. Schroders Capital Management (US) Inc. (‘Schroders Capital US’) is registered as an investment adviser with the US Securities and Exchange Commission (SEC).It provides asset management products and services to clients in the United States and Canada.For more information, visit www.schroderscapital.com
SIMNA, SFA and Schroders Capital are wholly owned subsidiaries of Schroders plc.
