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IF LIQUIDITY RETURNS IN 2024: 3 Steps to Prepare

by Dianna Raedle January 24, 2024

As liquidity potentially returns to the capital markets, it will likely “normalize” at a level which is significantly lower than the boom years given caution was thrown to the winds during the boom years and capital markets activity did not represent long term capital activity trends.

There is a good chance of liquidity returning to the markets given the record amount of dry powder available in most asset classes and the likelihood that interest rates have stabilized with a significant chance of starting to decline. 

Dry Powder by Asset Class:

  • $2.59 trillion in Private Equity Dry Powder1
    • 40% higher than 5 years ago, and 3x higher than a decade ago1
    • 21% held by the top 25 Private Equity firms1
  • $280 billion of Venture Capital Dry Powder as of 20232
    • With few deals in 2023, estimates are that much of this dry powder is still available
  • $205 billion of Real Estate Dry Powder 3
  • $400 Billion in Private Credit Dry Powder 4

Even with this amount of dry powder, it is likely that any transaction activity will be grounded in financial fundamentals as market participants will remain cautious given their experience over the last few years.

Prepare for these potential conditions as soon as possible in order to maximize the likelihood of success.

PrepareDescription
Alignment of Finances and Operations to StrategyFor a capital seeker to gain trust and credibility in the capital markets, it is important to ensure that the financial plans match the operational plans.  When these do not match, credibility and trust is eroded.
Build Brand / Expand RelationshipsUse consistent communications to expand relationships as well as build brand recognition efficiently and effectively.  The most successful organizations consistently work on expanding depth and breadth of relationships as well as their brand since these are some of the factors that help ensure organizational success.
Support for Growth PlansWell-developed growth plan support is key to accelerating transaction success.  This support should be developed early so that it is done in a professional and high quality manner.

If you would like to discuss this further – Contact us!  Or, if you or one of your clients is thinking about or has a capital opportunity – we advise creating successful outcomes.

1 https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/private-equity-firms-face-pressure-as-dry-powder-hits-record-2-59-trillion-79762227

2 https://www.businessinsider.com/venture-capital-cataclysm-layoffs-2024-outlook-2023-12

3 https://www.globest.com/2023/09/01/205b-of-dry-powder-ready-to-pounce-on-distressed-cre-assets/

4 https://www.spglobal.com/en/research-insights/featured/special-editorial/buying-time-post-default-with-private-credit

Contact Us:

Deer Isle Group

info@deerislegroup.com

———–

Founded in 2007, Deer Isle is an innovative investment bank that equips capital market participants with the tools they need for transparent, seamless, and efficient capital markets transaction success.

Since our inception, we have facilitated over $5 billion in capital transactions through Deer Isle Capital, LLC—our FINRA-registered broker-dealer—for companies and funds across various security types, sectors, and geographies.

At the core of our approach are effective, unbundled capital solutions, offering expertise and guidance that can be customized to meet each client’s unique needs. Our services, available on an "as-needed" basis, include:

  • Strategic Capital ConsultingTM (“Outsourced Strategic CFO services, Deer Isle Executive Management/Board Bootcamp or Sprint”) to prepare for a capital or M&A transaction leveraging the Deer Isle proprietary AI enhanced 4 pillar capital framework and real-world experience.
  • Beacon (“Proprietary Technology”) offers White-label and Turnkey Capital Provider engagementwith customized content and data analyticsfrom a relevant subset from a universe of 17,000+ institutional (fiduciary) capital markets organizations/50,000+ institutional capital market people.
  • Closing Advisory/Guidance (including “Shepherding”) expertise, through Deer Isle Capital, for structuring, negotiating, and completing a successful capital/M&A transaction.