Private markets brighten up at Fed's interest-rate cut
Plus: A $50M bet on Ukraine's private defense sector, and mid-market deals light PE fire
Welcome to The Weekly Pitch. Every Friday, we compile the week’s top news and research from PitchBook, the industry-leading source for info on the worlds of VC, PE and M&A.
Follow The Weekly Pitch here . Want more? Get our daily newsletter direct to your inbox.
Global M&A activity
With the decision to lower rates by half a percentage point instead of a quarter-point, the Fed is taking a relatively dramatic approach to its easing campaign. The first US interest rate cut in four years will lower businesses' borrowing costs and should ramp up M&A dealmakers' appetite.
Even strategic buyers in M&A are sensitive to high interest rates, which increase the cost of capital, writes VC reporter Rosie Bradbury . That has played out in the soft M&A dealmaking environment so far this year: The first half of 2024 saw an estimated $1.47 trillion in deal volume, 41%?off the two-quarter peak of $2.47 trillion in Q4 2021 and Q1 2022.
The effects of easing monetary policy are already being felt in Europe: the European Central Bank, Swiss National Bank and Sweden’s Riksbank all cut interest rates in Q2, which helped to drive a 17% rise in M&A deal value over the previous quarter.
The rate cuts may also encourage an IPO rebound, which would help GPs?return locked-up capital?to LPs. The news will be welcome for GPs trying to raise new funds, both for the potential boost to exits and how it could shift LP allocations moving forward.
But even as the Fed enters a new period of easing, it’s a far cry from the era of zero interest rates that supercharged the private markets and spurred a sustained bull run and a flurry of IPOs.
Related read:
Point72 veteran targets $50M for Ukraine defense tech VC fund
领英推荐
A former executive with Steve Cohen's Point72 hedge fund is betting big on Ukraine's brewing private defense sector.
Perry Boyle, who was head of equities and capital development for Point72, aims to raise $50 million for MITS Capital's flagship venture vehicle, Boyle told PitchBook reporter Michael Bodley . The firm will invest primarily in seed and Series A rounds for Ukrainian defense startups.
The launch comes as a US presidential election nears and peace prospects for the war remain up in the air. Prominent US VCs, including Andreessen Horowitz and Cerberus Capital Management, have launched defense-focused strategies.
Middle-market deals spark revival for by growing faster than broader PE market
Our latest US PE Middle Market Report highlights that buyout dealmaking gained traction in the first half of 2024—with middle-market deal value rising 12%, versus about 5% for the broader PE market.
The report also spotlights a change in key metrics, suggesting better times may lie ahead for PE. After a historic rally, small-cap public equities have closed the gap to large-cap companies and deal multiples for middle-market businesses are rebounding.