Overview

This year will test sponsors to think outside the box to deliver promised returns to investors. Despite some notable exceptions and a strong finish, 2024 saw a series of (particularly large) exits fail to transact. As a result, sponsors are increasingly looking for creative solutions to deliver improved DPI to LPs beyond the traditional auction process or dual track playbook. Increased use of minority sell downs and continuation vehicles are just some of the liquidity strategies we expect to see deployed this year.

This demand for creativity is not isolated to exits. On the buy-side, we expect to see a continued increase in PE sponsors using complex structured products and derivatives both to embed leverage into investment vehicles and acquire synthetic exposure to assets that are otherwise inaccessible. For distressed assets, the trend towards utilising novel statutory insolvency processes (e.g. loan-to-own models) to obtain a competitive edge in sale processes or compromise liabilities that would otherwise be entirely value destructive, seems set to continue.

From an asset perspective, among other in vogue sectors, Australia's ageing population will continue to shine a bright spotlight on health services and technologies that have the potential to unlock new models of healthcare delivery. We don't see the buzz around the possibilities for AI technology in healthcare slowing down any time soon. Investment in healthcare seems to be adopting the creative mantra of the broader M&A market in 2025.