--- title: How DPI (Distributed to Paid-in Capital) is Impacting PE Deal-Making and What to Expect in 2024 description: What kind of impact might distributed to paid-in capital have on private equity deal-making in 2024 and beyond? Learn more from our partners at Crowe! image: https://blog.itreconomics.com/hubfs/BlogImage_ITRBlogPE.png --- Industry Updates # How DPI (Distributed to Paid-in Capital) is Impacting PE Deal-Making and What to Expect in 2024 What kind of impact might distributed to paid-in capital have on private equity deal-making in 2024 and beyond? Learn more from our partners at Crowe! [ ITR Economics ](https://blog.itreconomics.com/blog/author/itr-economics) Sep 16, 2024 --- *Article by [Crowe](https://www.crowe.com/)* There has been no shortage of coverage on the deal-making environment (or lack thereof) in the second half of 2023 and first half of 2024. Equally, anyone with a keyboard and an interest in M&A has predicted a warm-up in the second half of 2024, which has reportedly begun to materialize on a few fronts: - [Pitchbook's July update](https://pitchbook.com/news/articles/lbo-update-high-demand-signals-dealmaking-potential) says demand signals for PE-backed leveraged buyout (LBO) deals are favorable, despite a very slow Q2. - Several banks, including [JPMorgan Chase](https://www.cnbc.com/2024/07/12/jpmorgan-chase-jpm-earnings-q2-2024.html) and [Goldman Sachs](https://www.barrons.com/articles/goldman-sachs-earnings-stock-price-d8e20198), reported significant Q2 increases within their investment banking divisions, which is a positive sell-side indicator for the second half of this year. - There are several other reports of increased activity – [**more mandates, more bidders, more aggressive bid strategies**](https://www.rwbaird.com/corporations-and-institutions/investment-banking/insights/2024/07/ma-market-recovery-set-to-strengthen-in-second-half/). - Investment bankers indicate a record backlog of deals ready to bring to market. - Crowe’s Transaction Advisory deal data indicates modest improvement in the first half of 2024 versus 2023, though it still lags the record activity of 2022 by nearly 20%; consistent with Pitchbook and others, we have seen gains largely driven by private and public companies’ acquisitions and PE-backed add-ons. **The case for second-half-of-2024 improvement: The log-jam breaks, rates cooperate, and PE-backed platform companies fill up the deal pipeline. ** - PE funds that want to keep LPs (and GPs) happy and raise their next fund start selling investments to keep DPI in the “green.” - DPI (distributed to paid-in capital) is the ratio of cash outflows to returns that LPs (limited partners, or investors) are experiencing. - Maintaining a healthy DPI is crucial for demonstrating success to current and potential investors – a higher DPI suggests that investors are receiving a good return on their investment, while a lower DPI may signal potential issues in portfolio performance or market conditions. - The GPs (general partners) at many funds who co-invest alongside their LPs are also watching DPI closely – they too want to see some returns from their investments before committing cash to future funds and investments. - Many PE funds have a significant backlog of portfolio companies whose “vintages” now signal it is time to transact – per Pitchbook, PE owns 50% more portfolio companies acquired between four and six years ago than just prior to the pandemic.  - PE dry-powder (committed funds to be deployed by the fund) remains at a record high but is aging – most PE structures limit the duration of time the GP has to call and deploy committed capital. **The case against: The deal-making environment worsens*. *** - Rates: Any cuts to the fed funds rate in the second half of 2024 are symbolic, and the private credit funding LBOs doesn’t react quickly. - Multiples: The buyer/seller dislocation continues as portcos purchased post-pandemic at inflated multiples remain difficult to sell at an attractive multiple; sellers achieved enough liquidity to balance their DPI equation this year by selling equity stakes to secondaries investors or taking on additional leverage through NAV or PIK arrangements. - Debt providers: The extensive support of PE deal-making by private credit tightens up, which creates obstacles to transacting without rate cuts. [**Bloomberg wrote extensively**](https://www.bloomberg.com/news/articles/2024-07-11/private-equity-s-creative-wizardry-is-obscuring-dangers-to-the-financial-system?embedded-checkout=true) in July about potential risks associated with the opaqueness of the private credit market. **What our clients are doing about it: ** 1. [Centering on driving real return](https://www.crowe.com/services/advisory/business-performance-improvement): Focusing on driving realizable gains in EBITDA – financial engineering aside, driving quantifiable operational improvements will improve the case for realizing a better outcome at sale. 2. [Re-evaluating portco forecasts](https://itreconomics.com/): Scrutinizing the portco's forecast mid-hold in light of predictive economic indicators and considering the timing of a sale process. 3. Getting the parachutes ready: Being ready to jump through the window of opportunity for the sale of a portco that's reached its “vintage” – having the right management team in place with advisors teed up and ready to go is key to taking advantage of the window. [Industry Updates](https://blog.itreconomics.com/blog/tag/industry-updates) ## Similar posts News ### [Budget Planning For 2023 Despite Economic Challenges](https://blog.itreconomics.com/blog/budget-planning-2023-despite-economic-challenges) ITR Economics and ButcherJoseph & Co. are here to help you with your budget planning for 2023 in the face of ongoing economic challenges. ITR Economics Aug 10, 2022 News ### [Objectively Consider Selling Your Business](https://blog.itreconomics.com/blog/objectively-consider-selling-business) ITR Economics has partnered with ButcherJoseph & Co. with the specific purpose of helping you manage your company’s future sale with confidence. 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