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Zawya
3 days ago
- Business
- Zawya
Global private equity dealmaking slows down amid headwinds
Global private equity (PE) dealmaking started to slow down in the second quarter of the year amid uncertainty and recent turmoil over tariffs. The value of buyout deals in April 2025 was 24% below the monthly average for the first three months of the year, while the number of deals fell 22%, according to Bain & Company. 'Dealmaking and exits are hit by market and economic headwinds triggered by recent turmoil over tariffs,' the consultancy firm said. The trend is in contrast to the first quarter of the year, when total deal value amounted to $189 billion, the highest since the second quarter of 2022, and around double the $95 billion in Q1 2024. 'The emerging weakness evident in Q2 is a direct consequence of the uncertainty injected into PE players' long-term models by tariff volatility, just as investors' confidence was beginning to return,' Bain noted. The slowdown is expected to continue in the short term, but Bain & Co noted that there are still opportunities amid the present uncertainties. 'There's nothing fundamentally broken in the market. Buyers and sellers can still transact, and history shows that strategic buyers with a strong M&A agenda remain active in turbulent times,' said Hugh MacArthur, chairman of the global Private Equity practice at Bain & Co. 'In any disruption there are winners and losers – and the best opportunities often come at the most extreme moments of uncertainty, something that's still true in 2025.' (Writing by Cleofe Maceda; editing by Seban Scaria)
Web Release
10-03-2025
- Business
- Web Release
Dealmaking rebound sees private equity recovery taking shape, Bain & Company Global PE Report
A global private equity (PE) revival is taking shape with a rebound in dealmaking gaining traction. But lingering headwinds from economic uncertainty, underscored by sluggish fund-raising, still cloud prospects for a full-blown PE recovery, Bain & Company's 16th annual Global PE Report, released today, concludes. Private equity investments as well as exits both bounced back last year in clear signs of renewed vigor for PE, reversing sharp declines in the two previous years that marked one of the industry's most challenging periods since the global financial crisis, Bain reports. Pent-up appetite among general partners (GPs) to get deals done and put aging dry powder to work, coupled with an improving economic environment as central banks cut policy interest rates, fueled a 37% year-on-year rise in buyout investment value to $602 billion in 2024 (excluding add-on deals). Alongside, exits also rebounded last year. Global exit value jumped 34% year-on-year to $468 billion, while exit count climbed 22% to 1,470, marking signs of a tentative but welcome thaw in the exits deep freeze that has staunched returning distributions of capital to limited partners (LPs), as well as broader PE industry liquidity, while leaving GPs sitting on backlog of 29,000 unsold companies. Despite a resurgence in investments and exits signaling a positive shift in dealmaking, Bain's latest analysis highlights that private equity's continued momentum in 2025 will depend on navigating a dynamic macroeconomic landscape. While challenges such as inflation trends, interest rates, trade policy, and geopolitical factors remain, the industry has demonstrated resilience and adaptability and is well-positioned to accelerate growth as conditions evolve. '2024 can be considered the year of the partial exhale. Whether the renewed impetus in 2024 can build will depend on how policy unfolds,' Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company, said. 'We think the headwinds that have held back activity since mid-2022 should continue to dissipate. The industry is anxious to make deals, GPs are finding creative ways to boost liquidity, more dollars should flow in from sovereign wealth funds and private wealth and, returns remain strong. But deal appetite is still tempered by the uncertainties keeping markets on edge. Investors are looking for clarity to break through the policy clouds on the economy, trade, regulation and geopolitics,' he said. Bain's report also highlights that a full-blown resurgence for PE globally should look very different from past recoveries as the industry grapples with structural disruptions which pose large-scale strategic questions. These far-reaching changes will significantly alter the basis of competition for investment opportunities and new capital in years ahead, it concludes. Bain notes that the industry's costs to generate market-beating returns are climbing steeply even as fees charged to investors are coming under heightened pressure. Average net management fees having fallen by as much as half since the global financial crisis, Bain analysis shows. Fierce competition for deals is ensuring valuation multiples stay high, elevated debt costs make it more difficult to generate value through leverage, and the expense of key requirements, from generating differentiated insights to delivering world-class investor relations, is rising. Gregory Garnier, Middle East head of the Private Equity practice at Bain & Company, said: 'The Middle East is entering a dynamic period of growth and transformation, creating unprecedented opportunities for investors. As economies diversify and sectors such as technology, renewable energy, and infrastructure gain momentum, private equity firms have a unique chance to drive meaningful value. The most successful funds will be those that take a forward-thinking approach, leveraging regional expertise, strategic partnerships, and innovative value-creation models. By setting a clear vision and building a sustainable, long-term growth strategy, investors can position themselves at the forefront of this exciting new era.' Solid growth in dealmaking across regions with take-private activity dominating top end of the market Bain's report charts the details of the revival in the PE market seen last year as conditions for the industry improved substantially, despite ongoing cross-currents. Easing interest rates and an improving comfort factor on the macro outlook were the chief drivers for the dealmaking upturn seen across regions and for most transaction sizes, Bain finds. It notes that an 83% rise in issuance of syndicated loans and ongoing growth of private credit also greased the skids for GPs anxious to put to work some $282 billion of aging dry powder. But although the buyout industry's dry powder stockpile fell slightly from $1.3 billion to $1.2 billion, the value of aging dry powder – unspent capital held for four years or longer – ticked up to 24% of the total, from 20% in 2002, keeping dealmakers under pressure and suggesting GPs are still struggling to find first-rate, affordable targets. While globally buyout investment value was up 37%, the number of deals rose by a smaller 10% year-on-year, to around 3,000 as 2024's average deal size jumped to $849 million, the second highest value historically. Deals worth $1 billion or more made up 77% of the total. Solid growth in deal value across regions was led by Europe, with a 54% rise on a 9% uplift in deal numbers, while in North America deal value grew 34% on a matching 9% rise in deal count. Asia-Pacific deal value grew 11% on slightly fewer deals, with a number of countries in the region seeing double-digit growth – although this was overshadowed by weaker growth in China and a decline in Japan. China represented half of deal Asia-Pacific deal value as recently as 2020, but that fell to just over 25% last year. Public to private deals continued to dominate the high-end of the PE market, increasing to $250 billion globally last year and representing almost half of deals over $5 billion in North America. Specialists taking advantage of mispriced assets is the US, even amid sharply higher public equity markets, amplified the take-private activity, Bain concludes. The technology sector meanwhile remained PE's staple sector, representing 33% of buyout deals by value and 26% by volume, with activity also strong at the intersection of tech and healthcare. Financial services deal value also jumped 92% year-on-year, while deals in industrials rose 81%. Exits pull out of two-year slide but the challenges of sluggish liquidity persist The jump in exits seen last year provided further signs of life for PE as well as some relief for the industry on the pressing challenge of selling enough companies to keep LPs happy with returns of liquidity to its investors. The 34% rise in global exits came as exit count jumped 22% to 1,470 in 2024, with activity strong in both North America and Europe, although broadly flat in Asia-Pacific where declines in China offset growth elsewhere. The lift-off in exits is best explained by a 141% leap in sponsor-to-sponsor exits which totaled $181 billion last year, boosted by a 48% rise in deal size, Bain notes. Strategic deals – sales to corporate buyers – were flat year-on-year while the IPO channel remained sluggish, representing just 6% of exits by value. Despite the stronger run for exits in 2024, both exit value and count remained stuck well below their five-year averages, with both GPs and LPs seeing the exit environment as the biggest impediment to strong returns, Bain concludes. Even with last year's rise in exit activity, distributions as a proportion of PE's net asset value sank to 11% – the lowest rate in a decade and down from an average of 29% from 2014 to 2017. Fund-raising falls for a third straight year intensifying competition for capital Bain's analysis pinpoints the persistent sluggishness of exits and the continued consequences of this for industry liquidity as the prime culprit for PE's still lacklustre fundraising. Fundraising across private asset classes fell for a third year in a row in 2024, tumbling 24% year-on-year and down 40% from the all-time peak of $1.8 trillion in 2021. The number of funds closed dropped 28% to 3,000 – about half the annual pace the industry was keeping before the Covid-19 pandemic. The industry's largest asset class, buyouts, continued to capture more than a third of all funds raised, yet buyout funds raised 23% less than in 2023 and the $401 billion in hand at the end of last year was about 11% below buyout's five-year average. While the number of buyout funds meeting or exceeding their fund-raising target in 2024 edged up to 85%, from 80% in 2023, average time on the road remained at around 20 months – not much different from the prior two years, and almost double the pre-pandemic pace of around 11 months. LPs are becoming even more discerning on investments and continuing to funnel capital to the largest, most experienced funds with consistent performance and differentiated strategies, Bain notes. This has allowed top-quartile managers to lock-in significantly larger follow-on vehicles while many lower-quartile funds experience difficulty in expanding or even meeting previous targets. Disruptions to shape a different form for recovery – and strategic imperatives for PE The escalating competition for capital and deals are among far-reaching structural changes which Bain finds will shake-up the competitive landscape for the industry in coming years, creating an imperative for firms to have a greater strategic focus and discipline. Bain warns that PE players cannot assume they will be able simply to ride the wave of a market recovery as in the past – notably in the prior 15-year era buttressed by zero interest rate policies and multiple expansion. Among key disruptions confronting firms, Bain points to the compression of margins amid mounting pressure on fees, magnified by a trend towards fee-free coinvestment; rising costs and complexity; fierce competition for capital turning fundraising into a game of 'haves and have-nots'; and the growing importance and impact of scale. Bain also highlights different requirements for GPs seeking to tap new sources of capital from sovereign wealth funds and private wealth, which it estimates will account for around 60% of growth in alternative assets under management over the next decade. With firm's scale becoming more important, and larger firms harnessing measurable advantages Bain also finds that M&A within the alternatives industry will play a greater role than previously, with 180 M&A transactions since 2021. In the face of the disruptions ahead that may reorder the industry's winners and losers, Bain concludes that firms seeking to lead need to define how they can stand out, with a clear ambition for where they should compete and how, and a bold, actionable strategy for where they want to be five to 10 years ahead. PE's AI race is on as leading firms invest aggressively and implement tangible use cases Private Equity firms are embracing generative AI to drive strategic value in their portfolios, with a race to capture the technology's transformative potential, Bain reports. Bain survey research finds that a majority of PE firms' portfolio companies were testing and developing AI, with nearly a fifth of companies having already operationalized generative AI use cases and seeing concrete results. PE firms leading the way to mine value from AI successfully have committed to the technology and are investing aggressively in building expertise and helping portfolio companies apply AI's power to their most important strategic initiatives, Bain reports. These firms are organizing to capture AI insights systematically, sharing these with and between portfolio companies, investing in AI capabilities and talent, implementing the right governance, and focusing efforts on top business priorities, Bain finds. With AI evolving at a breakneck pace, Bain cautions that it is not a panacea nor is there a 'one-size-fits all' approach. But it concludes that learning by doing is the key to harnessing AI's potential to operational efficiencies and enhanced revenues in PE firms and within their portfolios. Carve-outs are underperforming versus the past, but top-tier deals can still deliver A growing challenge for PE on the performance of corporate carve-out deals is also examined by Bain. While until 2012, carve-outs generated an average multiple of invested capital (MOIC) of around 3.0x, outstripping the 1.8x average for buyouts, this performance has since dropped to 1.5x. Bain finds the drop-off in performance stems from acquisition prices being driven up by greater competition for deals while sponsors are no longer delivering operational improvements they once did. While carved out companies saw revenues and margins boosted by 31% and 29% pre-2012, since then those figures have fallen to only 17% and 2%, DealEdge data analyzed by Bain shows. But with top-quartile carve-outs still producing solid returns with a 2.5x MOIC, Bain concludes that the common denominator for winning sponsors of carve-outs is ensuring an unbreakable link between a core value-creation thesis for a deal and setting up the new company to achieve this. The most certain and derisked path to a strong return for carve-outs is a bulletproof value-creation plan being in place during due diligence, coupled with a separation plan, talent strategy, and execution blueprint linked to delivering value-creation after the carve-out completes, Bain finds.
Zawya
07-03-2025
- Business
- Zawya
Private equity assets dip and 'dry powder' ages
Private equity assets under management dipped last year for the first time in at least two decades, and almost a quarter of the industry's US$1.2trn in so-called 'dry powder' has been held for four years or more – showing the industry's struggle to find attractive assets to buy. Those are two of the findings in the latest annual report on private equity by consulting firm Bain & Co. The report said global buyout assets under management were US$4.7trn last year, down from US$4.8trn at the end of 2023, marking the first annual decline in Bain's data going back to 2005. Assets grew at an annual compound rate of 14% from 2015 to 2023. Bain said fundraising was hard for many firms, as they have struggled to sell assets and return cash to investors. It estimated US$401bn was raised by the industry last year, down 23% from US$523bn in 2023 and the lowest annual tally since 2020. The report said the slowdown wasn't surprising, as fundraising is a lagging indicator that responds to industry cashflows, and a similar lull occurred after the global financial crisis in 2008. 'The heavy drawdowns of capital to feed the dealmaking beast in 2021 were followed by an abrupt skid in exit activity when interest rates spiked and dealmaking slumped,' said the report, led by Hugh MacArthur, chairman of global private equity for Bain. Bain estimated the buyout industry's dry powder – or stockpile of unspent capital – dipped to US$1.2trn last year from US$1.3trn in 2023, but within that, the amount that has been held for four years or longer was 24%, up from 20% in 2022. 'That suggests GPs (general partners) are struggling to find first-rate, affordable targets,' the report said. The report said there was a moderate pickup in exits by buyout firms last year, lifting optimism that dealmaking had turned a corner after two grim years. The value of exits last year was US$468bn, up 34% from 2023 – albeit that had been the worst year for exits in a decade. There were 1,470 exit deals in 2024, up 22% from the year before, with rises in North America and Europe but broadly flat in Asia, where there was a significant decline in China. Last year's rise in exits was largely thanks to sponsor-to-sponsor deals, which totalled US$181bn, up 26% from the five-year average, Bain said. Sales to strategic or corporate buyers totalled US$261bn last year, down 27% from the five-year average. The value of IPO exits was US$26bn in 2024, representing just 6% of exits by value and down 46% from the five-year average. 'Many private investors view IPOs as the channel of last resort, relying on it only for assets that are too big to sell otherwise. Not only are IPOs a hassle but they extend the length of time to a full exit and risk swings in value,' the report said. The value of last year's exits was down from US$855bn in the boom year of 2021 and US$595bn in 2022, although comparable to levels from 2014–2020. It means private equity firms are sitting on about US$3.6trn of unrealised value from about 29,000 companies they own, up from about US$2trn of unrealised value from 24,000 companies in 2020. The median time for an exit by a buyout firm last year was 6.1 years, down from 6.6 years in 2023 but up from 5.3 years in 2020, the report estimated. Bain said the outlook for a pickup in dealmaking is positive, but clouded by uncertainty at the start of this year around trade policy, inflation and interest rates. 'The industry is certainly anxious to make deals, but the year's early slowdown in M&A activity globally suggests that the dreaded U word (uncertainty) continues to keep markets on edge,' the report said. 'With inflation and interest rates in the balance, investors are looking for clarity amid back-and-forth signals regarding tariffs and other macro issues. 'But the consensus among economists is that, absent black swans, the cyclical headwinds that have held back dealmaking since mid-2022 should continue to moderate and give dealmakers a push,' the report said.
Associated Press
03-03-2025
- Business
- Associated Press
Dealmaking rebound sees private equity recovery taking shape -- Bain & Company Global PE Report
Buyout investments and exits bounce back strongly in 2024 but sluggish fund-raising underscores lingering headwinds from shifting macroeconomic outlook and geopolitical disruptions Rising costs to generate market-beating returns, fierce competition, and pressure on fees challenge funds to evolve differentiated strategies for value creation in an upturn set to be different from past recoveries BOSTON and LONDON, March 3, 2025 /PRNewswire/ -- A global private equity (PE) revival is taking shape with a rebound in dealmaking gaining traction. But lingering headwinds from economic uncertainty, underscored by sluggish fund-raising, still cloud prospects for a full-blown PE recovery, Bain & Company's 16th annual Global PE Report, released today, concludes. Private equity investments as well as exits both bounced back last year in clear signs of renewed vigor for PE, reversing sharp declines in the two previous years that marked one of the industry's most challenging periods since the global financial crisis, Bain reports. Pent-up appetite among general partners (GPs) to get deals done and put aging dry powder to work, coupled with an improving economic environment as central banks cut policy interest rates, fueled a 37% year-on-year rise in buyout investment value to $602 billion in 2024 (excluding add-on deals). Alongside, exits also rebounded last year. Global exit value jumped 34% year-on-year to $468 billion, while exit count climbed 22% to 1,470, marking signs of a tentative but welcome thaw in the exits deep freeze that has staunched returning distributions of capital to limited partners (LPs), as well as broader PE industry liquidity, while leaving GPs sitting on backlog of 29,000 unsold companies. Despite a resurgence in investments and exits signaling a positive shift in dealmaking, Bain's latest analysis highlights that private equity's continued momentum in 2025 will depend on navigating a dynamic macroeconomic landscape. While challenges such as inflation trends, interest rates, trade policy, and geopolitical factors remain, the industry has demonstrated resilience and adaptability and is well-positioned to accelerate growth as conditions evolve. '2024 can be considered the year of the partial exhale. Whether the renewed impetus in 2024 can build will depend on how policy unfolds,' Hugh MacArthur, chairman of the global Private Equity practice at Bain & Company, said. 'We think the headwinds that have held back activity since mid-2022 should continue to dissipate. The industry is anxious to make deals, GPs are finding creative ways to boost liquidity, more dollars should flow in from sovereign wealth funds and private wealth and, returns remain strong. But deal appetite is still tempered by the uncertainties keeping markets on edge. Investors are looking for clarity to break through the policy clouds on the economy, trade, regulation and geopolitics,' he said. Bain's report also highlights that a full-blown resurgence for PE globally should look very different from past recoveries as the industry grapples with structural disruptions which pose large-scale strategic questions. These far-reaching changes will significantly alter the basis of competition for investment opportunities and new capital in years ahead, it concludes. Bain notes that the industry's costs to generate market-beating returns are climbing steeply even as fees charged to investors are coming under heightened pressure. Average net management fees having fallen by as much as half since the global financial crisis, Bain analysis shows. Fierce competition for deals is ensuring valuation multiples stay high, elevated debt costs make it more difficult to generate value through leverage, and the expense of key requirements, from generating differentiated insights to delivering world-class investor relations, is rising. Rebecca Burack, head of the global Private Equity practice at Bain & Company, said: 'Generating alpha has never been more challenging. Strong performance is getting harder, not easier. An emerging upturn will inevitably present important opportunities for investors. But the winners will be those funds that demonstrate a consistent, differentiated model for value creation – and clear strategies for maintaining growth and performance for the long-term. The surest way to land in the winner's circle is to articulate your ambition clearly and develop a practical strategy for how you plan to compete in the years ahead,' she said. Solid growth in dealmaking across regions with take-private activity dominating top end of the market Bain's report charts the details of the revival in the PE market seen last year as conditions for the industry improved substantially, despite ongoing cross-currents. Easing interest rates and an improving comfort factor on the macro outlook were the chief drivers for the dealmaking upturn seen across regions and for most transaction sizes, Bain finds. It notes that an 83% rise in issuance of syndicated loans and ongoing growth of private credit also greased the skids for GPs anxious to put to work some $282 billion of aging dry powder. But although the buyout industry's dry powder stockpile fell slightly from $1.3 billion to $1.2 billion, the value of aging dry powder – unspent capital held for four years or longer – ticked up to 24% of the total, from 20% in 2002, keeping dealmakers under pressure and suggesting GPs are still struggling to find first-rate, affordable targets. While globally buyout investment value was up 37%, the number of deals rose by a smaller 10% year-on-year, to around 3,000 as 2024's average deal size jumped to $849 million, the second highest value historically. Deals worth $1 billion or more made up 77% of the total. Solid growth in deal value across regions was led by Europe, with a 54% rise on a 9% uplift in deal numbers, while in North America deal value grew 34% on a matching 9% rise in deal count. Asia-Pacific deal value grew 11% on slightly fewer deals, with a number of countries in the region seeing double-digit growth – although this was overshadowed by weaker growth in China and a decline in Japan. China represented half of deal Asia-Pacific deal value as recently as 2020, but that fell to just over 25% last year. Public to private deals continued to dominate the high-end of the PE market, increasing to $250 billion globally last year and representing almost half of deals over $5 billion in North America. Specialists taking advantage of mispriced assets is the US, even amid sharply higher public equity markets, amplified the take-private activity, Bain concludes. The technology sector meanwhile remained PE's staple sector, representing 33% of buyout deals by value and 26% by volume, with activity also strong at the intersection of tech and healthcare. Financial services deal value also jumped 92% year-on-year, while deals in industrials rose 81%. Exits pull out of two-year slide but the challenges of sluggish liquidity persist The jump in exits seen last year provided further signs of life for PE as well as some relief for the industry on the pressing challenge of selling enough companies to keep LPs happy with returns of liquidity to its investors. The 34% rise in global exits came as exit count jumped 22% to 1,470 in 2024, with activity strong in both North America and Europe, although broadly flat in Asia-Pacific where declines in China offset growth elsewhere. The lift-off in exits is best explained by a 141% leap in sponsor-to-sponsor exits which totaled $181 billion last year, boosted by a 48% rise in deal size, Bain notes. Strategic deals – sales to corporate buyers – were flat year-on-year while the IPO channel remained sluggish, representing just 6% of exits by value. Despite the stronger run for exits in 2024, both exit value and count remained stuck well below their five-year averages, with both GPs and LPs seeing the exit environment as the biggest impediment to strong returns, Bain concludes. Even with last year's rise in exit activity, distributions as a proportion of PE's net asset value sank to 11% - the lowest rate in a decade and down from an average of 29% from 2014 to 2017. Fund-raising falls for a third straight year intensifying competition for capital Bain's analysis pinpoints the persistent sluggishness of exits and the continued consequences of this for industry liquidity as the prime culprit for PE's still lacklustre fundraising. Fundraising across private asset classes fell for a third year in a row in 2024, tumbling 24% year-on-year and down 40% from the all-time peak of $1.8 trillion in 2021. The number of funds closed dropped 28% to 3,000 – about half the annual pace the industry was keeping before the Covid-19 pandemic. The industry's largest asset class, buyouts, continued to capture more than a third of all funds raised, yet buyout funds raised 23% less than in 2023 and the $401 billion in hand at the end of last year was about 11% below buyout's five-year average. While the number of buyout funds meeting or exceeding their fund-raising target in 2024 edged up to 85%, from 80% in 2023, average time on the road remained at around 20 months – not much different from the prior two years, and almost double the pre-pandemic pace of around 11 months. LPs are becoming even more discerning on investments and continuing to funnel capital to the largest, most experienced funds with consistent performance and differentiated strategies, Bain notes. This has allowed top-quartile managers to lock-in significantly larger follow-on vehicles while many lower-quartile funds experience difficulty in expanding or even meeting previous targets. Disruptions to shape a different form for recovery – and strategic imperatives for PE The escalating competition for capital and deals are among far-reaching structural changes which Bain finds will shake-up the competitive landscape for the industry in coming years, creating an imperative for firms to have a greater strategic focus and discipline. Bain warns that PE players cannot assume they will be able simply to ride the wave of a market recovery as in the past – notably in the prior 15-year era buttressed by zero interest rate policies and multiple expansion. Among key disruptions confronting firms, Bain points to the compression of margins amid mounting pressure on fees, magnified by a trend towards fee-free coinvestment; rising costs and complexity; fierce competition for capital turning fundraising into a game of 'haves and have-nots'; and the growing importance and impact of scale. Bain also highlights different requirements for GPs seeking to tap new sources of capital from sovereign wealth funds and private wealth, which it estimates will account for around 60% of growth in alternative assets under management over the next decade. With firm's scale becoming more important, and larger firms harnessing measurable advantages Bain also finds that M&A within the alternatives industry will play a greater role than previously, with 180 M&A transactions since 2021. In the face of the disruptions ahead that may reorder the industry's winners and losers, Bain concludes that firms seeking to lead need to define how they can stand out, with a clear ambition for where they should compete and how, and a bold, actionable strategy for where they want to be five to 10 years ahead. PE's AI race is on as leading firms invest aggressively and implement tangible use cases Private Equity firms are embracing generative AI to drive strategic value in their portfolios, with a race to capture the technology's transformative potential, Bain reports. Bain survey research finds that a majority of PE firms' portfolio companies were testing and developing AI, with nearly a fifth of companies having already operationalized generative AI use cases and seeing concrete results. PE firms leading the way to mine value from AI successfully have committed to the technology and are investing aggressively in building expertise and helping portfolio companies apply AI's power to their most important strategic initiatives, Bain reports. These firms are organizing to capture AI insights systematically, sharing these with and between portfolio companies, investing in AI capabilities and talent, implementing the right governance, and focusing efforts on top business priorities, Bain finds. With AI evolving at a breakneck pace, Bain cautions that it is not a panacea nor is there a 'one-size-fits all' approach. But it concludes that learning by doing is the key to harnessing AI's potential to operational efficiencies and enhanced revenues in PE firms and within their portfolios. Carve-outs are underperforming versus the past, but top-tier deals can still deliver A growing challenge for PE on the performance of corporate carve-out deals is also examined by Bain. While until 2012, carve-outs generated an average multiple of invested capital (MOIC) of around 3.0x, outstripping the 1.8x average for buyouts, this performance has since dropped to 1.5x. Bain finds the drop-off in performance stems from acquisition prices being driven up by greater competition for deals while sponsors are no longer delivering operational improvements they once did. While carved out companies saw revenues and margins boosted by 31% and 29% pre-2012, since then those figures have fallen to only 17% and 2%, DealEdge data analyzed by Bain shows. But with top-quartile carve-outs still producing solid returns with a 2.5x MOIC, Bain concludes that the common denominator for winning sponsors of carve-outs is ensuring an unbreakable link between a core value-creation thesis for a deal and setting up the new company to achieve this. The most certain and derisked path to a strong return for carve-outs is a bulletproof value-creation plan being in place during due diligence, coupled with a separation plan, talent strategy, and execution blueprint linked to delivering value-creation after the carve-out completes, Bain finds. Media contacts To arrange an interview or for any questions, please contact: Dan Pinkney (Boston) — Email: [email protected] Gary Duncan (London) — Email: [email protected] Ann Lee (Singapore) — Email: [email protected] About Bain & Company Bain & Company is a global consultancy that helps the world's most ambitious change makers define the future. Across 65 cities in 40 countries, we work alongside our clients as one team with a shared ambition to achieve extraordinary results, outperform the competition, and redefine industries. We complement our tailored, integrated expertise with a vibrant ecosystem of digital innovators to deliver better, faster, and more enduring outcomes. Our 10-year commitment to invest more than $1 billion in pro bono services brings our talent, expertise, and insight to organizations tackling today's urgent challenges in education, racial equity, social justice, economic development, and the environment. We earned a platinum rating from EcoVadis, the leading platform for environmental, social, and ethical performance ratings for global supply chains, putting us in the top 1% of all companies. Since our founding in 1973, we have measured our success by the success of our clients, and we proudly maintain the highest level of client advocacy in the industry.
