Globally, $796 billion of deals were announced in Q1 2024, showing a very healthy 36% increase on the start of 2023. This gain was driven by significant strength in the US, more specifically in the energy and life sciences sectors. But there was also an uplift across Europe, especially in the UK, and an acceleration of deal-making in financial services along with a return of technology asset acquisitions.
Our latest CEO survey points to a striking uptick in intentions to divest an asset or part of the business, either through a trade sale, a sale to PE or a spin. Recent market developments will support this through 2024, as companies look to off-load parts of their business to either bring greater focus to their operations or to raise capital to invest in their remaining portfolio.
Our latest EY Private Equity Pulse shows this sentiment for divesting continued to rise among PE deal-makers in Q1, driven by greater macro clarity, increased visibility into interest rates and a sense that the valuation gap — one of the primary impediments to deal-making in recent quarters — continues to resolve. Nonetheless, announcements remain markedly uneven. While February was one of the busiest months of the last year, March was among the slowest.
It’s becoming increasingly clear that while the PE market will continue to recover over the balance of the year, the trajectory will be nonlinear.
As hold periods continue to increase — in the US, for example, average hold periods hit 5.3 years last year — pressure continues to build for realizations. While many corporates remain more focused on selling — in particular, carving out noncore divisions — sponsors have been more active in acquiring PE assets.
Carve-out activity remains robust, as strategics continue to rationalize their businesses and raise cash to invest in core competencies. Last quarter, carve-outs made up 20% of deployment activity by value vs. approximately 5% in Q1 2023, and 11% in Q4 2023.
Still, with global funding markets being more open in 2024 than 2023, acquirers can be more confident in securing funding. Companies looking to divest will also be supported by an increasing appetite for new issues on exchanges and the long-awaited return of PEs as competitive buyers.
