January 29, 2024

Private Equity: Crystal Balling 2024

The M&A lawyers at Morrison & Foerster recently gazed into their crystal ball and came up with their annual memo laying out their predictions for what 2024 may have in store for dealmakers.  In addition to predicting an overall rebound in activity and continued strength in middle market PE deals, the memo addresses potential trends that could play out during the year.  This excerpt discusses expectations for take private transactions:

In 2023, the percentage of PE deal value resulting from take privates sharply increased as sponsors searched for and found undervalued assets that they could take private and restructure to realize value. Meanwhile, many founders of private companies chose to hold onto their companies rather than reduce their valuation and sell or conduct a down round financing in a difficult and uncertain market. We expect the appetite of PE sponsors for take privates to continue and potentially increase in 2024 in some regions.

Of course, take privates can prove challenging with resistant boards, proxy fights, dissenting shareholders and the heightened risk of losing the deal at the last moment, after having expended a considerable amount on fees and expenses, as a bidder with a superior offer swoops in.

The memo hedges its bets by pointing out that there are a lot of “wild cards” that could come into play, including geopolitical issues and the U.S. presidential election, and that these could be significant both for the global economy & private equity transactions.

John Jenkins