At the onset of Q4 for 2024, we sat down with several private equity partners to hear their insights into a year marked by economic shifts, volatility, and uncertainty. They recap their respective firm’s performance and look ahead to 2025 forecast.
Explore our other articles in this series of roundtable discussions with private equity investors:
- The Signs Private Equity Looks for When It’s Time to Sell a Business
- How Private Equity Prepares a Business for Sale to Ensure a Smooth Deal Process
- What Entrepreneurs Often Neglect to Do When Preparing to Sell Their Company to Private Equity
- How Private Equity Determines If a Company Is Prepared to be a Platform Investment
Meet the Panel of Private Equity Partners
The following responses have been edited for concision and clarity.
How has 2024 been?
Sean McNally
It’s been an odd year overall. M&A activity seems to be slightly down, with some sectors of the economy feeling more stress than others. The rise in interest rates hasn’t helped relieve that pressure. However, business metrics and demand are still relatively strong. There’s a sort of “wait and see” approach from many buyers and sellers as they try to understand where the economy and the market are heading, especially with the upcoming election. For about 12 months now, things have been in a bit of a standstill.
Brandon Muirhead
2024 has been a series of stops and starts for us. We closed a new platform early in the year, but then deal flow really slowed down until after Memorial Day. The summer has been extremely busy, and we have several deals in the works.
The uncertainty around interest rates—along with it being an election year—has influenced this. People are unsure if the Fed will lower rates or hold them constant, and as we get closer to the election, it’s uncertain who will win, which will have implications for business and tax policy.
Some are saying, “Let’s go now before any changes,” while others are waiting to see what happens.
Erik Dykema
The year has actually been a good one for us, especially considering what happened at the end of last year. We’ve completed four platforms and two add-ons in the last 12 months, which is a pace we’ve never invested at before. The general market environment has been challenging to invest in, but it’s well-suited to our style. We’re a recap-focused firm, typically targeting companies in the $4 to $12 million EBITDA range with owners keeping a meaningful ownership stake going forward. Our investment style—emphasizing ownership rolls—has been a differentiator, particularly in the current climate. Additionally, two of those four deals were with independent sponsors—an area we haven’t historically targeted but now find to be promising and worth more attention.
Brendan Forghani
It’s been a good year. I think the year played out a little differently than most people anticipated. Deal activity started out slower in Q1, but then things began to pick up for us. It’s been encouraging to see more actionable and interesting opportunities return to the market. Although rate cuts took longer than expected, the recent news should only help going forward. On the portfolio side, our companies have held up well—inflation subsided, consumer demand remained strong, and overall, we’re happy with performance.
Ryan Anderson
2024 has been a better year, though it probably hasn’t lived up to the expectations many of us had going into it. It’s been a year where buyers and sellers have more frequently come together, resulting in more transactions. In 2023, there was a bigger gap between private equity firms and founders, with significant disagreements on fair value, which caused a lot of deals to fall through. This year has shown improvement, and we’re optimistic heading into 2025.
What do you expect in 2025?
Brendan Forghani
I think things will continue to pick up. A lot of the recent challenges—COVID, inflation, supply chain issues, interest rates—are mostly behind us. On both the buy and sell sides, people have adapted to what I’d call the “new normal.” There’s more stability and certainty in the operating environment. Also, there’s the record amount of private equity dry powder, which is still true. Many private equity-owned businesses have been held for a long time, so those will need to be monetized eventually. I think both buyers and sellers will be motivated, which should lead to more activity.
Sean McNally
Several factors play into the forecast for 2025. First, many pre- and during-COVID investments are now reaching the five-to-six-year mark, and some of the company-building initiatives were delayed due to COVID. These investments are now ripe for potential sales.
Second, the M&A market has been relatively slow, so there’s built-up demand. Portfolios are growing, and firms need to avoid becoming too large. There’s also an abundance of dry powder on the sidelines, with pressure to deploy capital soon. We suspect there will be more active buyers in the next 12 to 18 months as the economy becomes clearer.
Brandon Muirhead
We expect further rate cuts, and any relief in interest rates will unlock deal flow. Conversations with business brokers and investment bankers suggest that 2025 is shaping up to be a big year for M&A, driven largely by interest rates.
With election uncertainty gone after 2024, we’ll know who’s in the White House, which will clarify tax and regulatory policy. Whether it’s a Democrat or Republican, either result will deal activity. For example, if tax policies around capital gains change, we could see a rush in M&A like we did a few years ago.
Ryan Anderson
We need clarity around the election. If Trump is elected, that’s going to have a bigger impact, with tariffs being a key topic. We’ll need to think about how that will affect various companies. Clarity on interest rates is also important. As interest rates continue to tick down, many smaller businesses with fluctuating rate debt will receive a new lifeline, and financing will become cheaper.
