While deal activity has increased and recent interest rate cuts have provided some momentum, the sectors recovery is still in its early stages, IPE writes. The media reports that deal flow saw a strong boost in Q2 2024, where global deals reached USD 196 billion, nearly doubling the prior quarter. Valuations have stabilized around 9.5 times earnings, but are still down from the highs seen in 2021, which makes exits more difficult, IPE continues.

As a result, all eyes are now on distributions to paid-in capital (DPI) because it measures the real cash returns in relation to the amount of invested capital, IPE concludes.

Asked about his view on this situation, Ivan Vercoutère, a Managing Partner at LGT Capital Partners, said: “DPI is the new IRR. One of the main reasons GPs are holding onto their assets is that they prefer selling at 2021 valuations, which were higher, rather than the potentially lower prices in 2024. As distribution yields had dropped significantly to around 10% during Covid, compared to the pre-pandemic average of 25%, GPs understand they need to generate liquidity and return capital to LPs if they hope to successfully raise new funds in the future."

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