Macro Bites: The economy’s impact on private equity investment strategy

June 10, 2024

Persistently elevated costs are holding the US Fed back from lowering interest rates. For private equity (PE) firms this means the cost of capital remains high. How has this affected PE investment strategy? EY-Parthenon Chief Economist Gregory Daco and EY Americas Private Equity Leader Tim Tracy discuss how PE firms have extended their holding periods and the strategies they are using to create value and exit profitably. They also look at how federal incentives are attracting PE investment in the infrastructure space. At the same time, as labor costs remain high, PE firms are turning to tech enablement and artificial intelligence (AI) to improve back-office operations.

Key takeaways

  • Strategic and operational improvements will continue to be the largest value creation opportunity for PE funds.
  • Tech made up one-third of PE deal values in 2023, the single largest area of investment.
  • Generative AI (GenAI) is being developed as an in-house tool to augment the investing process.

Host and featured guests

gregory daco

Gregory Daco
EY-Parthenon Chief Economist, Strategy and Transactions, Ernst & Young LLP

Tim Tracy

Tim Tracy
EY Americas Private Equity Leader

How EY-Parthenon can help

  • Private equity strategy consulting

    EY-Parthenon provides strategy consulting to private equity firms by helping clients maximize value throughout the investment lifecycle. Learn more.

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  • Strategy consulting

    EY-Parthenon professionals recognize that CEOs and business leaders are tasked with achieving maximum value for their organizations’ stakeholders in this transformative age. We challenge assumptions to design and deliver strategies that help improve profitability and long-term value.

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