Private equity growth investments have increased their share of deal flow, as the industry’s larger buyout firms stepped up their interest in minority stakes.
According to PitchBook’s latest US PE Breakdown, PE growth investments were on the rise in the first half of 2024, accounting for about 23% of all PE deals and surpassing leveraged buyouts, which made up 19%. That reverses a long-time trend.
Growth investments in the first half of 2024 are already exceeding those from the whole of 2023, when they accounted for 20% of all PE deals.
PitchBook’s lead private equity analyst, Tim Clarke, attributed the uptick to buyout firms adopting a hybrid approach—deviating from the typical LBO route by pursuing more minority deals. That strategy allows an existing PE owner to retain its investment while a new investor can enter at a more favorable price.
The lines between growth deals and buyouts are blurring partly because growth equity deals don’t rely on arranging debt financing, at a time when borrowing costs remain high by historical standards, Clarke said.
“However, the downside is that PE firms can’t exercise the same level of control in a growth equity structure, which can complicate exit strategies and timing,” Clarke added. “Growth equity dividends also tend to be lower, which is challenging when LPs are eager to reinvest capital in a new fund.”
7Brew, a drive-thru coffee chain, received a growth investment from Blackstone in February. The company aims to expand its franchise across the US. Growth deals typically make up a small portion of Blackstone’s investments.
In August, Boston-based BV Investment Partners, which typically acquires controlling stakes in companies, made a growth investment in New Zealand-based Kami, an educational software developer with plans to open a Boston office.
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