Daily InsightsNovember 13 , 2024 

Exits Are Back, But Different

Privitas published its inaugural report, “Sponsor-to-Sponsor Exits 2024” on November 11th, examining major exit trends for the first three quarters of this year. 

According to Privitas data, sponsor-to-sponsor (S2S) exits have dominated the landscape this season, accounting for 68% of total exit outcomes for PE-backed companies with enterprise values over $100 million between Q1 and Q3 2024, up from 35% during the same period in 2023. The median enterprise value in the dataset was $550 million, showing how S2S exits have become a very common exit outcome for large PE-backed companies

The distinction in exit valuations is important – Matthew Wesley, global head of private capital advisory at Jefferies, told The Financial Times that secondary sale-style exits for the private equity sector overall in 2024 are likely just 14% of total exits, up from 4-5% in 2019 and 2020. 

There are a myriad of reasons behind the phenomenon. First, the enterprise values for companies exited to strategic acquirers are, on the whole, smaller than those exited via sponsor-to-sponsor transactions, according to Pitchbook data. Strategic acquirers are also focusing M&A on acquiring capabilities in specific areas such as AI as they choose to sit on cash rather than spend it. 

“With so many private equity transactions happening in any given year, it’s important to segment portco exits by size to really understand the trends in each part of the market,” said Cooper Smith, founder and managing director at Privitas and author of the report.

Additionally, a weakened IPO market has restricted exit options for large cap players. 

“If the IPO market was stronger, we would likely see more exits to public markets and fewer S2S exits,” Smith added.

The report is the first of many from Privitas, a business intelligence firm for private equity operations. Future reports will tackle portfolio company benchmarks using our proprietary Portco IQ index, as well as sector-specific and cross-industry trends. 

Members can read the full report here. The report breaks down S2S trends by sector, holding periods, enterprise value growth, and different value creation strategies.

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