Private Equity Hits the Accelerator as Economic Fundamentals Show Signs of Improvement
BluWave, the Business Builders' Network that connects the private equity industry with best-in-class talent, industry consultants and service providers, today released its latest Private Equity Insights Report showing how dealmakers are gaining confidence in an improving environment in 2024 and beyond.
"Our proprietary data shows the business builders of PE are finding increasing conviction in the economy, taking more growth-minded action, and finding ways to get new deals done," said Sean Mooney, founder and CEO of BluWave. "While we might not see new records for M&A activity in 2024, there are strong indications the private equity industry has already started gearing up for the next 6-8-year growth cycle."
Within the scattered noise of signals, BluWave observes how private equity firms perceive an overall improving economic environment. Inflation as of December has fallen by nearly 50% since the same time a year prior and 63% from the June 2022 peak. GDP has seen five consecutive quarters of growth. Additionally, the Federal Reserve has foreshadowed that it intends to cut rates three times in 2024. All of this points to a U.S. economy that will be strong enough and more likely to get overall better than worse in the days ahead.
Through the course of connecting hundreds of private equity firms and thousands of portfolio companies with the business-building resources they need, BluWave's data shows that private equity firms are shifting from safety to growth postures. Notably, private equity firms increased their year-over-year portfolio company project activity related to sales and marketing by nearly 20% during 2H 2023, 10% in technology and 8% in human capital. BluWave analysts believe the timing of these types of significant investments signals the early stages of a new economic cycle beginning.
"The private equity industry typically takes action a year ahead of the rest of the economy. Our previous Private Equity Insight Reports foretold how private equity firms were proactively taking action to get ahead of risks like disrupted supply chains, tight labor markets and inflation," Mooney said. "We are now seeing private equity firms raise their sails as they help their portfolio companies pick up speed in advance of clearer skies ahead."
In the face of an otherwise slower new deal market, BluWave's proprietary data also shows how private equity firms are taking extra effort and initiative to find more ways to get deals done. In the fourth quarter of 2023, private equity firms moved diligence projects forward at a 38% greater rate than they did in the fourth quarter of 2022 and increased the amounts spent on due diligence projects by more than 25% during this same time. All of this points toward private equity digging deeper into opportunities to help them more intimately understand risks and identify previously unforeseen upsides.
To request a copy of the full report, please visit: https://www.bluwave.net/get-insights/
About BluWave
BluWave is the Business Builders' Network for private equity grade service provider needs. The company's platform combines AI, technology and data with concierge-like consultative support to expertly connect businesses with proven providers across due diligence, value creation and prep for sale. The BluWave Vettedtm network is an invite-only ecosystem of top-tier service-providing groups and individuals. Based in Nashville, Tenn., BluWave ranks as one of America's fastest-growing companies and today serves hundreds of leading private equity firms and thousands of portfolio companies.
Visit BluWave.net to learn more.
About BluWave PE Industry Insights Report
The BluWave Private Equity Insights report is derived from an analysis of BluWave's proprietary data involving thousands of projects across due diligence and value creation made by the private equity industry and its dealmakers as they contact BluWave for their third-party resource needs. Given that hundreds of private equity firms and their substantial pool of affiliated portfolio companies leverage BluWave for resource needs at the onset of thousands of due diligence and value creation projects*, the proprietary data captured in the BluWave PE Insights report is a market-leading indicator of both dealmaker sentiment and portfolio strategy. When paired with relevant market trends and data, the BluWave PE Insights report is a valuable empirical indication of dealmaker historical and future behavior.
*Note that BluWave defines due diligence projects with a PE firm as those that are used to help evaluate a potential investment target before an investment is made and value creation projects as those that are intended to help increase a company's enterprise value after an investment has been made and during the holding period.
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