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The Rise of Private Equity Firms in 2024

The Rise of Private Equity Firms in 2024

The private equity industry has experienced substantial growth over the past 10 years, but we haven’t seen anything yet. This key component of the global economy has a very bright and expanding future filled with imminent trends, according to industry experts and forecasts.  

The immediate horizon looks promising for participating companies and industry professionals alike. In the United States alone, the private equity sector employed 12 million workers in 2022, up from 8.8 million in 2018 – and 2024 is on track to raise the bar ever higher.  

  • The United States dominates the private equity industry globally, with U.S. private equity firms controlling more than $6 trillion in assets. 
  • According to the S&P Global Market Intelligence 2024 Private Equity and Venture Capital Outlook, the private equity industry is showing resilience and optimism for 2024, despite a 2023 slowdown and shifting market dynamics. According to the outlook, PE executives are more optimistic about deal activity in 2024 with 60% expecting improvements, compared to 34% last year. 
  • As of 2021, private equity firms managed roughly 20% of U.S. businesses. Their access to large amounts of capital is increasingly attractive to business owners looking for lenders as bank loans can be harder to access and carry stubbornly high interest rates. 
  • The U.S. private equity market size is expected to reach $460 billion in 2024, and by 2027, the market is forecasted to increase to $765 billion, with a compound annual growth (CAGR) of 11%.  

What is a private equity firm?  

Private equity firms, commonly called PE firms, pool investor funds to invest in or acquire companies that are not publicly traded on a stock exchange. They typically assume controlling stakes in these portfolio companies and work with management to improve a business and increase its profitability.  

Success for portfolio companies is achieved using a PE firm’s access to capital, alongside equally important strategic, financial, and operational expertise. A PE fund may also buy out a public company, take it private, and restructure it for growth. Once a portfolio company is operating successfully, the PE firm exits the investment by taking the portfolio company public or selling it.  

“Private equity is one of the most potent forces in the world of finance. PE firms buy companies and participate actively in their businesses to help them grow and achieve their full potential. These investment firms operate in some of the most dynamic sectors in the economy, particularly technology, and they foster innovation that has a deep impact across the economy.” — Rebecca Baldridge, CFA  

U.S. private equity firms are major stakeholders within the larger global private equity industry, fueling growth and constant innovation. American firms were early investors in such household names as Google, Apple, Facebook (Meta), Uber, and many others. Technology companies remain a target sector for PE firms, among countless others, depending on a given PE firm’s unique portfolio strategy.  

  • Private equity firms manage funds and make investments in target companies. They include general partners (GP) who manage the funds and limited partners (LP) who provide the capital. 
  • Portfolio companies receive investments from private equity firms. As mentioned, these companies benefit from capital, strategic guidance, and operational expertise provided by PE investors. 

Private equity trends for 2024  

With investors anticipating increased deal activity, Ernst & Young Global Limited entity EY anticipates private equity firms to prioritize five key areas in 2024, stating that, “Firms will expand their deployment of artificial intelligence (AI), setting the stage for large-scale transformation of the enterprise. Many firms will also seek to improve other operational efficiencies as they build upon the past decade of rapid growth.”  

EY’s five key trends in 2024:  

  1. Deploying artificial intelligence will lead the way: In 2024, private equity firms will expand their use of artificial intelligence. It is anticipated that AI implementation will quickly shift from automating back-office functions to automating enterprise-scale platforms.  
  2. Investment in infrastructure: In 2024, infrastructure, particularly energy infrastructure, will continue expanding as an asset class for PE investment, allowing for more diversified products and funds that match investor expectations.  
  3. Value creation: In 2024, strategic and operational improvements will continue to be the largest source of private equity returns, creating opportunities across sales, marketing, operations, and finance.  
  4. More efficient use of working capital: Optimizing operational value through working capital will be a key priority. In EY’s recent PE pulse survey, 80% of PE professionals indicated they were paying more attention than usual to helping companies improve visibility into cash and liquidity needs.  
  5. Retail market expansion: PE firms are experimenting and developing expanded opportunities via the retail channel, and for many, retail inflows represent their fastest-growing source of new funds, leading them to develop new targeting methods for these investors.  

Here are several other emerging and prevailing trends among private equity firms:  

  • Environmental, social, and governance (ESG) factors have become increasingly important for private equity firms, with greater emphasis being placed on sustainability and responsible investing practices.  
  • The healthcare sector remains a key focus area due to demographic shifts, technological advancements, and growing demand for services.  
  • Alternative assets are attractive to private equity firms wanting to diversify their portfolios within classes such as private debt, real estate, insurance, and special situations.  
  • Sector specialization is being tapped by PE firms to create expertise in specific industries or sectors to differentiate themselves and unlock value through deep industry knowledge. 
  • Geographic diversification is helping private equity firms expand their geographic reach to capitalize on growth opportunities in emerging markets and diversify their investment portfolios.  

Differentiate your firm: Choose an expert private equity recruiter  

In the coming months, private equity firms will look for ways to bring more value to their existing portfolios. They’ll also use more creativity when it comes to finding and evaluating new investment opportunities. Firms will also have to continue adjusting their strategy to stay ahead of the competition and find new ways to differentiate themselves in the marketplace. — Joe Camberato, CEO and Founder, National Business Capital  

With the rise in firms and increasing competition, one way PE firms will succeed in differentiating themselves is by having experienced and creative professionals on board – at both their firms and portfolio companies. According to a BDO survey of CFOs at 142 U.S. middle-market companies, one potential speed bump to product and service expansion for portfolio companies is an ongoing talent shortage. More than half of finance heads told BDO the crunch was a risk to achieving their goals.  

Make Goodwin Recruiting your talent source. Our private equity recruiters know the caliber of candidates you need, and we have a nationwide network of active and passive candidates with strong track records and a deep understanding of financial markets. Our experts have worked with firms across the United States in helping to onboard strong leadership and operations team members, including:   

  • Investment Professionals: Associates, vice presidents, and managing directors who are responsible for sourcing, evaluating, and executing investment opportunities 
  • Operations Professionals: For roles focused on improving the operational efficiency and performance of portfolio companies post-acquisition 
  • Financial Services Professionals: Professionals who handle financial reporting, analysis, and accounting functions for both private equity firms and portfolio companies  
  • Legal Professionals: Legal and compliance professionals who ensure firms and their investments comply with relevant regulations and mitigate legal risks  
  • Marketing Professionals: For roles that involve capital fundraising, identifying and cultivating relationships with potential investors, and marketing investment strategies 
  • HR Professionals: Great candidates who specialize in talent acquisition, development, and retention within the firm and support portfolio companies on HR-related matters 
  • IT and Operations Professionals: For roles that manage a firm’s technology architecture and portfolio, including systems for data management, security, and reporting    

Whether you’re an employer looking for help with hiring or an industry professional looking for a new opportunity in any of the above roles, make Goodwin Recruiting your trusted partner for success.