Conditions improve for dealmaking and IPOs after challenging period

  • Private-equity and venture-capital firms have faced tough conditions since 2008
  • Money cycle for exiting deals through IPOs has fallen to lowest level in 14 years
  • Market volatility is still cooling conditions around IPOs
  • Total global private-equity transaction value rose 58% in Q4 2023
  • Venture-capital firms may sell private portfolio companies to private-equity firms
  • Few IPOs have come from venture-capital-backed companies in 2024
  • Wall Street focusing on companies with $500 million to $1 billion in revenue
  • Regulatory push and compliance costs have hampered growth
  • Uncertainty around geopolitical situation and presidential election may delay IPOs
  • Years following big market downturns have delivered strong performances from venture-capital firms

Private-equity and venture-capital firms have faced some of the toughest conditions since the 2008 financial crisis. The money cycle for exiting deals through IPOs has fallen to the lowest level in about 14 years. Market volatility continues to impact IPO conditions. However, there are signs of recovery as total global private-equity transaction value rose 58% in the fourth quarter of 2023. Venture-capital firms may have an opportunity to sell their private portfolio companies to private-equity firms. While few IPOs have come from venture-capital-backed companies in 2024, the market is showing some signs of life. Wall Street is focusing on companies with $500 million to $1 billion in revenue. Regulatory push and compliance costs have hampered growth. The uncertainty around the geopolitical situation and the presidential election may delay IPOs. However, the years following big market downturns have delivered strong performances from venture-capital firms.

Public Companies: BrightSpring Health Services Inc. (BTSG), Amer Sports Inc. (AS), Fortegra Group Inc. (N/A), Tiptree Inc. (TIPT), Warburg Pincus (N/A), BBB Foods Inc. (TBBB), CG Oncology Inc. (CGON)
Private Companies: undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined, undefined
Key People: Chris Sugden (Managing Partner, Edison Partners), Cameron Joyce (Analyst, Preqin), Steve Brotman (Managing Partner, Alpha Partners), David Solomon (Chief Executive, Goldman Sachs)

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Factuality Level: 7
Justification: The article provides information about the decline in venture capital and private equity activity, the reasons behind it, and the potential outlook for the future. It includes data from reputable sources such as PitchBook and Preqin. However, there are some speculative statements and opinions presented as facts, such as the expectation of interest rate cuts and the optimism about the IPO market in 2024. Overall, the article provides a reasonable analysis of the current state of the venture capital and private equity industry.

Noise Level: 4
Justification: The article provides information on the decline in private-equity and venture-capital activity, the reasons behind it, and the potential outlook for the market. However, there is some repetitive information and the article does not provide a thorough analysis of long-term trends or antifragility.

Financial Relevance: Yes
Financial Markets Impacted: Private-equity and venture-capital firms

Presence of Extreme Event: No
Nature of Extreme Event: No
Impact Rating of the Extreme Event: No
Justification: The article discusses the current state of the financial markets, specifically the decline in mergers and acquisitions and initial public offerings for private-equity and venture-capital firms. There is no mention of any extreme events.

Reported publicly: www.marketwatch.com