Private capital insight experts at law firm Farrer & Co have shared their predictions for the year ahead and how it will impact deal activity, access to capital, and liquidity for private companies and investors in 2024.
Key points highlighted in the article include:
- The valuation gap between sellers and buyers will continue due to higher interest rates and political and economic uncertainty.
- The use of earn-outs and consideration shares will help bridge the valuation gap in M&A deals.
- Increased due diligence and warranty claims from previous M&A activity are expected.
- Liquidity will be more readily deployed into specific sectors such as technology, AI, wealth management, assisted living, and infrastructure.
- A rise in distressed business sales is predicted due to increased interest rates, a challenging trading environment, and rising costs.
- Growth in governance and corporate accountability for private businesses due to regulatory and commercial reasons.
- Increasing focus on ESG and sustainability for private capital-backed companies.
- Continued focus on technology, particularly AI, and its practical delivery and impact on businesses.
- Supply chain pressures will continue to be a business risk.
- Recruitment and retention of key staff will be a priority.
- Continued pressures on corporate borrowers due to high debt costs, reduced appetite from traditional lenders, and the ending of fixed rate facilities.
- Implementation of the National Security & Investment Act for inbound investments and acquisitions, as well as the Economic Crime and Corporate Transparency Act in October 2023, will continue to be relevant to transactions at all levels.
