After a few lacklustre years, the outlook for private capital in 2024 is undoubtedly positive. That was clear from our Private Capital Sentiment Survey.
While we welcome such a positive outlook, we are also keen to understand some of the drivers behind this and any challenges that this sector faces.
One of the first questions that we asked participants was about deal timelines. In response to the question “Are deals taking longer to complete?”, almost two thirds of respondents (62%) confirmed that this was the case.
So does the data support this sentiment? Termgrid’s end to end platform for private capital deals gives us a unique perspective to answer this question.
The chart below shows the percentage of completed deals on Termgrid’s platform. This figure remained stable in Q4 2023 while the average deal timeline lengthened by a staggering 56%.
For clarity, this chart shows a percentage of all the deals closed on Termgrid’s platform. While the percentage of completed, dropped and lost deals varies slightly – it is in line with broad trends over time. The secondary axis shows deal timelines presented as a three month historical figure with the weighted average rising from below 3.5 months in October to over 5 months in December.
For small, highly specialized teams working on multiple deals this type of increase can be painful. Our survey gave us some insight into the cause of this extension of timelines. Some 59% of our survey cited a mismatch of price expectations – a multiple of any other factors cited by survey respondents.
While we understand that there may still be a mismatch of price expectations in M&A, the new year has brought a fresh wave of activity and optimism to the private credit market. The drivers of this include new budgets, desire to deploy capital and pressure on GPs to return funds to LPs.
“Against a difficult backdrop of nominal activity in the last two years, 2024 has been fast out of the block. In addition to strong activity we see on the Termgrid platform, price compression and refinancings are leading indicators of a strong year for private credit,” said Dipish Rai, co-founder and CEO, Termgrid.
“We are delighted to work with all of our private capital community to drive efficiencies throughout their financing processes and portfolio management. Even in changing market conditions, deals can be executed seamlessly using our platform.”