Moonfare Outlook | Private markets set for 2025 rebound as exits, valuations recover

What's new: Private market activity is accelerating into 2025, with improved financing conditions and narrowing bid-ask spreads expected to unlock pent-up deal flow and exit opportunities.

Why it matters: After two challenging years, the private markets recovery could help solve LP liquidity issues and reinvigorate fundraising, potentially marking a turning point for the industry.

The big picture: Deal activity has already shown signs of improvement in 2024, with PE deals up 36% by value and 18% by volume through Q3. The missing piece - exits - appears poised for recovery as financing conditions ease and valuations stabilize.

By the numbers:

• Private equity deals rose 36% by value through Q3 2024 versus 2023

• US fundraising reached $236 billion in first three quarters of 2024

• Buyout funds hold $3.2 trillion in unsold companies

• Average holding periods peaked at 5.8 years in 2023

Key trends to watch:

• Exit acceleration

  • IPO pipeline building for 2025

  • Bid-ask spreads narrowing as rates stabilize

  • Sponsor-to-sponsor deals increasing

• Market dynamics

  • Financing costs falling as competition among lenders rises

  • Private credit moving toward bespoke solutions

  • Secondary market volume hitting record levels

• Operational focus

  • Value creation becoming central to returns

  • Technology driving industrial and business services deals

  • Margin expansion critical in higher-rate environment

The bottom line for investors: While recovery looks promising, success in 2025 will require careful navigation of macro risks and a continued focus on operational improvements rather than multiple expansion or leverage.