In this insightful discussion, David Rubenstein, a renowned figure in the financial world, shares his predictions for the future of Mergers and Acquisitions (M&A) and private equity. He delves into the factors that led to a decrease in M&A and private equity activity in the previous year, including the mismatch between the price people wanted to pay and the ones they wanted to sell, the impact of high interest rates on sellers and buyers, and concerns about a potential recession. Rubenstein also provides a comprehensive forecast for the year 2024, predicting an increase in M&A and private equity activity due to decreasing interest rates and reduced fears of a recession.
- Interest Rates and M&A Activity: David Rubenstein discusses the impact of high interest rates on mergers and acquisitions (M&A) in the previous year. He notes that sellers were hesitant to sell due to the fear of not getting desired prices, while buyers were cautious about entering a potential recession. However, with the recession fears subsiding and interest rates expected to come down, Rubenstein anticipates an increase in M&A and private equity activities.
- Federal Reserve and Interest Rate Cuts: Rubenstein talks about the difficulty in predicting the Federal Reserve's actions but suggests that the market expects interest rate cuts. He believes the Fed will likely make these cuts before the U.S. presidential election to avoid political implications.
I'd be very surprised if there isn't some cut by March."
- Impact of U.S. Election on Deal Making: He acknowledges that the current antitrust enforcement might not favor big acquisitions, but this doesn't significantly impact private equity as their acquisitions are usually standalone. The main concerns have been interest rates and the possibility of a recession.
- Private Equity Trends: Rubenstein observes a consolidation trend in private equity, especially in infrastructure. He mentions the Black Rock and GIP deal as an example, highlighting the growing investor interest in infrastructure due to its predictable returns.
- Infrastructure Investments: He emphasizes the importance of infrastructure in building the future and notes that while some private equity firms have significant infrastructure businesses, others might look to expand in this area. The predictability and attractiveness of infrastructure investments are underscored.
- Concerns in Private Equity: Addressing concerns about smaller spaces in private equity, Rubenstein points out that despite high interest rates and economic challenges, there have been relatively few bankruptcies and distressed debt opportunities. He anticipates more distressed debt opportunities in real estate, particularly in commercial real estate.
Video source: Copyright © Bloomberg, Youtube
Video source: Copyright © Bloomberg, Youtube
