GLOBALPRIVATEEQUITYREPORT2024

AboutBain&Company’sPrivateEquitybusiness

Bain&Companyistheleadingconsultingpartnertotheprivateequity(PE)industryanditsstakeholders.PEconsultingatBainhasgrowneightfoldoverthepast15yearsandnowrepresentsaboutone-thirdofthefirm’sglobalbusiness.Wemaintainaglobalnetworkofmorethan2,000experiencedprofessionalsservingPEclients.Ourpracticeismorethantriplethesizeofthenext-largestconsultingcompanyservingPEfirms.

Bain’sworkwithPEfirmsspansfundtypes,includingbuyout,infrastructure,realestate,anddebt.Wealsoworkwithhedgefunds,aswellasmanyofthemostprominentinstitutionalinvestors,includingsovereignwealthfunds,pensionfunds,endowments,andfamilyinvestmentoffices.Wesupportourclientsacrossabroadrangeofobjectives:

Dealgeneration.Weworkalongsideinvestorstodeveloptherightinvestmentthesisandenhancedealflowbyprofilingindustries,screeningtargets,anddevisingaplantoapproachtargets.

Duediligence.Wehelpsupportbetterdealdecisionsbyperformingintegratedduediligence,assessingrevenuegrowthandcost-reductionopportunitiestodetermineatarget’sfullpotential,andprovidingapost-acquisitionagenda.

Immediatepost-acquisition.Afteranacquisition,wesupportthepursuitofrapidreturnsbydevelopingstrategicblueprintsforacquiredcompanies,leadingworkshopsthatalignmanagementwithstrategicpriorities,anddirectingfocusedinitiatives.

Ongoingvalueaddition.Duringtheownershipphase,wehelpincreasethevalueofportfoliocompaniesbysupportingrevenueenhancementandcost-reductioninitiativesandrefreshingtheirvalue-creationplans.

Exit.Wehelpensurethatinvestorsmaximizereturnsbypreparingforexit,identifyingtheoptimalexitstrategy,preparingthesellingdocuments,andprequalifyingbuyers.

Firmstrategyandoperations.WehelpPEfirmsdevelopdistinctivewaystoachievecontinuedexcellencebydevisingdifferentiatedstrategies,maximizinginvestmentcapabilities,developingsectorspecializationandintelligence,enhancingfund-raising,improvingorganizationaldesignanddecisionmaking,andenlistingtoptalent.

Institutionalinvestorstrategy.Wehelpinstitutionalinvestorsdevelopbest-in-classinvestmentprogramsacrossassetclasses,includingprivateequity,infrastructure,andrealestate.Topicsweaddresscoverassetclassallocation,portfolioconstructionandmanagerselection,governanceandriskmanagement,andorganizationaldesignanddecisionmaking.Wealsohelpinstitutionalinvestorsexpandtheirparticipationinprivateequity,includingthroughcoinvestmentanddirectinvestingopportunities.

Bain&Company,Inc.

131DartmouthStreet

Boston,Massachusetts02116USA

Tel:+16175722000

NetPromoter?,NPS?,NPSPrism?,andtheNPS-relatedemoticonsareregisteredtrademarksofBain&Company,Inc.,NICESystems,Inc.,andFredReichheld.NetPromoterScoreSMandNetPromoterSystemSMareservicemarksofBain&Company,Inc.,NICESystems,Inc.,andFredReichheld.

Copyright?2024Bain&Company,Inc.Allrightsreserved.

GlobalPrivateEquityReport2024

Contents

TheDarkbeforetheDawn................................................2

PrivateEquityOutlook2024:TheLiquidityImperative..........

.........

....

..3

Investments.............................................

.........

....

..9

Exits......................................................................................................

..................

........

..15

Fund-raising...............................

.......

...

.19.........

Returns.................................

......

...

.24.........

Move-InReady:RenovatingYourGrowthStrategy.............

.........

....

.28

HaveSecondariesReachedaTippingPoint?...........

......

...

.35........

BuildingaStrongerBuy-and-Build.......................

........

....

39.....

HarnessingGenerativeAIinPrivateEquity.................................45

TheYearCashBecameKingAgaininPrivateEquity..........................52

1

GlobalPrivateEquityReport2024

TheDarkbeforetheDawn

DearColleague:

Theyear2023wasoneofportent.Dealvaluefellby37%.Exitvalueslidevenmore,by44%.Fund-raisingdroppedacrossprivatecapital,as38%fewerbuyoutfundsclosed.Interestingly,dollarcommitmentsinbuyoutssurgedasanumberofhigh-performingfundscametomarket.Butitwastrulyayearofhavesandhave-nots.Just20fundsaccountedformorethanhalfofallbuyoutcapitalraised.

Thewordforthismarketisstalled.Cuttingthroughallofthemacronoisewasthe525-basis-pointincreaseinUScentralbankratesfromMarch2022toJuly2023.Thespeedandmagnitudeofthisrisecausedgeneralpartnerstohitthepausebutton.

Thegoodnews?Interestratesappeartobestableandhavebeenforafewmonths.Recorddrypowderisstackedandreadyfordeployment.Asizablechunkofthisdrypowderisagingandneedstobeputtowork.Lookingintoportfolios,nearlyhalfofallglobalbuyoutcompanieshavebeenheldforatleastfouryears.

Inshort,theconditionsappeartobeshiftinginfavorofhittingthegobutton.Wewillseewhat2024brings.

Bestwishes,

HughMacArthur

Chairman,GlobalPrivateEquity

2

PrivateEquityOutlook2024:

TheLiquidityImperative

Spikinginterestratesderaileddealmakingin2023andleftthecapitalflywheelsputtering..Gettingunstuckisjoboneintheyearahead..

ByHughMacArthur,RebeccaBurack,GrahamRose,ChristopheDeVusser,KikiYang,andSebastienLamy

AtaGlance

Privateequitycontinuedtoreelin2023asrapidlyrisinginterestratesledtosharpdeclinesindealmaking,exits,andfund-raising..

Theexitconundrumhasemergedasthemostpressingproblem,asLPsstarvedfordistributionspullbacknewallocationsfromallbutthelargest,mostreliablefunds..

Thelong-termoutlookremainssound,butbreakingthelogjamwillrequiremorerobustapproachestovaluecreationandrapidinnovationinliquiditysolutions..

It’ssafetosaytheprivateequityindustryhasneverseenanythingquitelikewhat’shappenedoverthelast24months.

Whilethesharpdrop-offindealactivityinlate2022andinto2023echoestheperiodfollowingthe2008–09globalfinancialcrisis(GFC),thesituationtheindustryfacestodayislargelyunprecedented.

ThenumbersareallveryGFC-like:Dealvalueanddealcounthavefallen60%and35%,respectively,fromtheirpeaksin2021.Exitvalueisdown66%,andthenumberoffundsclosingisoffbynearly55%

3

GlobalPrivateEquityReport2024

(seeFigure1).Yetwhat’sdrivingthesedeclinescouldn’tbemoredissimilartowhatwashappeningin2008–09,andmakingsenseofitrequiresadifferentlensaltogether.

Asdifficultasitwas,theaftermathoftheGFCfollowedapredictablepattern:Tocopewiththecrisis,centralbankersslashedinterestratestospuractivity,theeconomyslowlystabilized,andprivateequitywasabletoclawitswaybackfromwhatmanypredictedwouldbeitsunraveling.Theresultingperiodofgrowthintheyearsthatfollowedcreatedaprivateequityindustrythatisvastlylargerandmorecomplexthananyonein2008couldhavereasonablyexpected.

Yettodaythatsizeandcomplexitymagnifythechallengestheindustryfaces.Businessconditionsaremoreperplexingthanpredictable.Interestrateshaverisenfasterthanatanytimesincethe1980s,anditremainsunclearwhentheUSFederalReservewillreversecourseorwhererateswilleventuallysettle(seeFigure2).Concernsaboutwhatwedubbedlastyear“themostanticipatedrecessioninhistorythathasn’thappenedyet”continuetolinger.Yettothesurpriseofmostanalysts,theeconomyischuggingalongnicely.Record-lowunemployment,reasonablegrowth,andsurgingpublicmarketsintheUSsuggestthepossibilitythatwemightjustescapethesemonthsofturmoilwithnothingworsethanasoftlanding.

Thesecrossedsignalshaveleftprivateequityhamstrung.Thesheervelocityoftheinterestrateshockwassomethingfewintheindustryhadeverexperienced,andtheimpactonvaluehasdrivenawedgebetweenbuyersandsellers.

Figure1a:Investments,exits,andthenumberofbuyoutfundsclosedallcontinuedtoslidein2023astheindustryreeledfromrisinginterestrates

Investments

Exits

Fund-raising

Globalbuyoutdealvalue

Globalbuyout-backedexitvalue

Globalbuyoutcapitalraised

Dealcount

Exitcount

Countoffundsclosed

$1,250B

(–60%)

4,000

$1,250B

(–66%)

3,000

$600B

(–1%)

1,000

1,000

3,000

1,000

2,000

400

800

750

750

600

2,000

500

500

1,000

200

400

1,000

250

250

0

0

0

0

0

0

2013

2018

2023

2013

2018

2023

2013

2018

2023

Notes:Investments—excludesadd-ons;excludesloan-to-owntransactionsandacquisitionsofbankruptassets;basedonannouncementdate;includes

announceddealsthatarecompletedorpending,withdatasubjecttochange;Exits—includesfullandpartialexits;bankruptciesexcluded;IPOvalue

representso?eramountandnotmarketvalueofcompany;Fund-raising—datagroupedbytheyearinwhichfundsheldtheir-inalclose;countisofall

funds,includingthoseforwhich-inalclosedataisunavailable;buyoutcategoryincludesbuyout,balanced,coinvestment,andcoinvestment

multimanagerfunds;excludesSoftBankVisionFund

Sources:Dealogic;Preqin

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GlobalPrivateEquityReport2024

Figure1b:Activityduringthesecondhalfoftheyearwasanimprovementonthefirst,butnotbymuch

Investments

Exits

Fund-raising

Globalbuyoutdealvalue,quarterly

Globalbuyout-backedexitvalue,

Globalbuyoutcapitalraised,

quarterly

quarterly

Dealcount

Exitcount

Countoffundsclosed

$350B

1,000

$350B

600

$200B

400

300

800

300

150

300

250

250

400

600

200

200

100

200

150

400

150

200

100

200

100

50

100

50

50

0

0

0

0

0

0

2020

2021

2022

2023

2020

2021

2022

2023

2020

2021

2022

2023

Notes:Investments—excludesadd-ons;excludesloan-to-owntransactionsandacquisitionsofbankruptassets;basedonannouncementdate;includes

announceddealsthatarecompletedorpending,withdatasubjecttochange;Exits—includesfullandpartialexits;bankruptciesexcluded;IPOvalue

representso?eramountandnotmarketvalueofcompany;Fund-raising—datagroupedbytheyearinwhichfundsheldtheir-inalclose;countisofall

funds,includingthoseforwhich-inalclosedataisunavailable;buyoutcategoryincludesbuyout,balanced,coinvestment,andcoinvestment

multimanagerfunds;excludesSoftBankVisionFund

Sources:Dealogic;Preqin

Figure2:The525-basis-pointriseininterestratesfromMarch2022toJuly2023wasthesharpestmonetarytighteningindecades

Centralbankinterestratesbyregion(monthlyaverage)

+113basis+289bps+98bps+25bps

6%

points

inUS

4

2

0

Jan

Jul

Jan

Jul

Jan

Jul

Jan

Jul

2020

2020

2021

2021

2022

2022

2023

2023

US

UK

Europe

Notes:USshowsfederalfundsrate;Europeshowseuroshort-termreporate;UKshowsclearingbanksbaserate(middlerate);basispointchangesover

asix-monthperiodaredisplayedfortheUSonlyandcalculatedbasedontheincreaseinaverageinterestratesbetweentheendofJuneandDecember

ofeachyear

Source:LSEG

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GlobalPrivateEquityReport2024

Pricemultiples,whichtendtomoveinverselytointerestrates,havetippeddownwardoverthelastyear,butonlyslightlysofar.That’sbecausesellersarebringingtomarketonlythehighest-qualityassets,thosetheyareconfidentwillmoveatareasonablereturn.Otherwise,theexitchannelshavelargelydriedup,leavinggeneralpartners(GPs)withatowering$3.2trillioninunsoldassetsandstanchingtheflowofcapitalbacktolimitedpartners(LPs).

Thesedeclinesinactivityhavehadachillingeffectonfund-raising.SlowerdistributionshaveleftLPscashflownegative,crimpingtheirabilitytoplowmorecapitalbackintoprivateequity.Theindustrystillraisedanimpressive$1.2trillioninfreshcapitalin2023,andthebuyoutcategoryattracted$448billion.ButLPswerehighlyselective.Whilecapitalflowedtothelargest“reliablehand”buyoutfunds,fund-raisingformostwasashardasit’severbeen.

SlowerdistributionshaveleftLPscashflownegative,crimpingtheirabilitytoplowmorecapitalbackintoprivateequity.

UntilGPscanbeginmovingassetsoutoftheirportfoliosinatimelyfashion,raisingthenextfundwon’tgetanyeasier.Andthethreattoreturnsisreal.Buyoutstypicallyinvolvetermloansthatexpireinfivetosevenyears.Already,interestcoverageratiosamongbuyout-backedportfoliocompaniesintheUShavedroppedto2.4timesearningsbeforeinterest,taxes,depreciation,andamortization(EBITDA),thelowestlevelsince2007.ThatispressuringGPstobothfindliquiditysolutionsanddevisenewwaystogenerateprofitsthroughoperatingleverage—notjustthemultipleexpansionandrevenuegrowththeindustryhasleanedonforyears.

Earlysignsofaturnaround?Themostdifficultaspectofthisgridlock,ofcourse,ispredictingwhatwillhappennext.Butinourview,thegreenshootsofarecoveryarestartingtopokethrough.Perhapsthemostimportantisthat,barringanynewmacroshocksorgeopoliticalcrises,ratesaremorelikelythannottomoderateinthecomingyear.

Evenslightcutsarelikelytospurondealmakingaslongasthemacrooutlookremainsrelativelystable.Buyoutfundsalonearesittingonarecord$1.2trillionindrypowder,and26%ofthatisfouryearsoldorolder,upfrom22%in2022(seeFigure3).ThatcreatesaheavierincentivethannormalforGPstogetoffthesidelinesandstartbuying,evenifconditionsaren’tideal.Activityisalreadytickingupward,andwithhelpfromtheFedandtheEuropeanCentralBank,thebiasin2024islikelytotheupsidewhenitcomestodealcountandvalue.

Exitsareanothermatter.Barringasharper-than-anticipateddropinrates,sellerswillcontinuetofacehighhurdlestounloadingcompaniestostrategicbuyers,othersponsors,orthepublicmarkets.

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GlobalPrivateEquityReport2024

Figure3:Witharecord26%ofglobalbuyoutdrypowdernowfouryearsoldorolder,generalpartnersareundergrowingpressuretododeals

Globalbuyoutdrypowder,byyearssincecapitalraised($T)

$0.7T

0.7

1.0 0.9

0.8

1.2

1.0

3yearsorless

4–5years

Morethan5years

2017

18

19

20

21

22

23

Shareofcapital

19

19

18

19

23

22

26

thatisatleast

4yearsold(%)

Notes:Buyoutcategoryincludesbuyout,balanced,coinvestment,andcoinvestmentmultimanagerfunds;assumesaverageinvestmentperiodofiveyears;percentagesplitofcapitalraisedin2023isasofQ2;discrepanciesinbarheightsdisplayingthesamevalueareduetoroundingdi?erencesSources:Preqin;Bainanalysis

WithsponsorsstrugglingtosendcashbacktotheirLPs,2024willlikelybedefinedbyhowcreativetheindustrycanbeinfindingwaystogenerateliquidity.

Actionrequired.What’sclearisthatpassivelywaitingforconditionstorecoverisnotaviablestrategy.Muchofthisreportisdevotedtoexploringhowthesedynamicsareplayingoutandwhatthemostforward-thinkingGPsareworkingon.Gettingunstuckwilldemandactioninseveraldirectionsatonce:

Doublingdownonvaluecreation.Theexitsituationisshiningabrightlightonhowcriticalitistogenerateoperatingleverageinamarketwheretailwindsfrommultipleexpansionhaveturnedintoheadwinds.Youcan’tcontrolthedirectionofrates.Butyoucangetbetteratunderwritingvalueandcapturingitthroughcrispexecution.We’vetalkedaboutitforyears:Theindustryhasrelieddisproportionatelyonrisingmultiplesandrevenuegainstogeneratereturnswhilemarginimprovementhascontributedpracticallynothing.Thatnolongerworkswhenrisingratesserveasballastforassetmultiples.

TheportfoliocompaniesthatwillstandoutinthisdifficultmarketarethosethathaveusedeverymeanspossibletoboostEBITDAefficientlyandcandemonstratetothenextownerthatthere’smoneyleftonthetable.Thatmeansfundshavetogetsharperatfindingandpullingthevalue-creation“levers”thatgenerateorganicgrowth—pricing,salesforceeffectiveness,and

7

GlobalPrivateEquityReport2024

productinnovation,tonameafew.Iftheseinsightsweren’tpartoftheoriginalvalue-creationplan,nowisthetimetofocusonthem.Themarkethasbeenabundantlyclearonthis.Thecompaniesthataresellingarenotthosethathavemerelygottenbiggerand/orleaner.Thepremiumisongeneratingstrong,profitable,organicgrowth.

Managingacrosstheportfolio.WhilestrategiesfocusedonEBITDAgrowthtaketime,aballooningexitbacklogalsopresentsmoreimmediateconcerns.Fundsneedtodevelopaclear-eyed,pragmaticappraisalofwhereeachportfoliocompanysitsintermsofitsreturnprofile,itscapitalstructure,anditsfutureprospects.Aslongasratesstayelevated,GPshavechoicestomake:Whichcompanieswillreapanacceptablereturnifwesellnow?WhichshouldwesellanywaysowecanreturncashtoLPs?Whichcompaniesfaceloanexpirations,andwherecanweeffectively“amendandextend”toreshapeabalancesheetwithouttoomuchpain?Whatareouroptionsforgeneratingliquiditythroughtheburgeoningsecondarymarket?

Iftheindustry’sgrowinginventoryofunsoldassetsisn’tgoingtobeaproblem,thereareafewthingsyouhavetobelieve.First,withalargevolumeofportfoliocompaniesfacingrefinancinghurdles,itwillbecriticalthatdebtholderstakethestancetheydidin2008–09.Lendersclearlydidn’twantthekeystoabunchoftroubledportfoliocompaniesthenandprobablydon’twantthemnow.Thatleavesopentheopportunitytopayapenalty,addsomeequity,andarriveataworkablecapitalstructure.

Thesecondthingyouneedtobelieveisthatthereareenoughinnovativesolutionslikecontinuationfunds,securitizations,andNAVfinancingtohelpGPsrecapprizedassetsandwaitforreturnstoripenwhilekeepingeconomicinterestalignedbetweenGPsandLPs.Thesecondariesspaceisstillsmallandsomewhatcontroversial.Butitisgrowingrapidlyandrepresentsthekindoffinancialinnovationthatisprivateequity’sspecialty.

Professionalizingfund-raising.Aneffectiveportfolioscanshouldleadtoaclear,practicalroadmapforsteeringthefundthroughanimmenselydifficultperiod.ThenextstepiscommunicatingtoLPshowportfoliomanagersareusingallthetoolsattheirdisposaltoactasatrustedstewardofinvestorcapital.GPsaren’tparticularlyadeptatthiskindofcommunicationbecausetheyhaven’thadtobeinthepast.Adhoc,anecdotalconversationsaboutasingleportfoliocompanyweresufficientwhenperformanceoverallwasn’treallyinquestion.

Nowperformanceiseverything,andthecompetitionforalimitedpoolofcapitalhasneverbeenmorefierce.Thisisspurringthemostproactivefundstoconsidermakingastepchangeinhowtheyapproachinvestorsbyprofessionalizingprocessesandhoningtheirgo-to-marketcapabilities.Thefirmsout-raisingothersarestrategicallymappingoutwhotheirLPsshouldbeanddevelopingthecapabilitiesandtoolsnecessarytounderstandwhatittakestowinwiththemandexpandshareofwallet.TheyarebuildingthekindofcommercialorganizationsthebestB2Bsellersrelyondaily.

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GlobalPrivateEquityReport2024

Noneofthisiseasy,ofcourse,butnoneofitisinsurmountable.PrivateequitysurvivedtheoverexuberanceoftheRJRNabiscoyears.Itlivedthrough9/11andthesubsequentrecession.Ittooktheworstblowsoftheglobalfinancialcrisisandcameoutevenstronger.Theindustry,inotherwords,hasconsistentlydemonstrateditsresilience.Thisisoneofthosemoments.Timetogettowork.

Here’samoredetailedlookatwhathappenedin2023.

Investments

Privateequitydealmakerstendtomakethemostofthecardsthey’redealt.Aslongastheyhavereasonableconfidenceinwhat’scoming,they’llfindawaytomakeagooddealwork.ButconfidencewasthefirstcasualtywhentheFedjackedratesatthefastestpacesincethe1980s,leavingtheindustrygaspingforair.Thefalloffthatstartedinthesecondhalfof2022bledoverinto2023.

Excludingadd-ons,buyoutinvestmentvaluedroppedto$438billion,a37%decreasefrom2022andtheworsttotalsince2016(seeFigure4).Overalldealcountdropped20%toaround2,500transactions.Thesteepslopeofthedeclinewassomethingtheindustryhadn’texperiencedsincetheglobalfinancialcrisis.Themalaiseinfectedregionsacrosstheworld,withEuropeandAsia-Pacificbothexperiencingsignificantdeclines(seeFigure5).

Figure4:Thetwo-yearfalloffinglobalbuyoutdealvaluemarksthesteepestdeclinesincetheglobalfinancialcrisis

Globalbuyoutdealvalue,byregion

$1,200B

1,086

Dealcount

Changeindealvalue

4,000

2023vs.

2023vs.

1,000

726

3,000

Restof

2022

5-yr.avg.

800

–22%

–47%

694

699

world

600

332

463

532

499

519

2,000

Asia-

–8%

–32%

400

240

397

369

438

Pacific

200

295

195

222

231

305

1,000

Europe

–46%

–38%

94

North

–38%

–31%

0

0

America

Total

–37%

–34%

20050607080910

1112

1314

1516

1718

19

2021

22

23

Avg.

256

476

118

260

304

349

521

542

1,029

788

deal

494

165

229

206

278

380

604

700

801

size($M)

Notes:Excludesadd-ons;excludesloan-to-owntransactionsandacquisitionsofbankruptassets;basedonannouncementdate;includesannounced

dealsthatarecompletedorpending,withdatasubjecttochange;geographybasedontarget’slocation;averagedealsizecalculatedusingdealswith

disclosedvalueonly

Source:Dealogic

9

GlobalPrivateEquityReport2024

Figure5:Dealvalueandactivitydeclinedglobally

NorthAmerica

Europe

Asia-Paciic

Buyoutdealvalue

Buyoutdealvalue

Buyoutandgrowthdealvalue

$600B

Buyoutcount

Buyoutcount

Buyoutandgrowthcount

2,000

$600B

2,000

$600B

6,000

1,500

1,500

400

400

400

4,000

1,000

1,000

200

500

200

500

200

2,000

0

0

0

0

0

0

2012

2023

2012

2023

2012

2023

Notes:NorthAmericaandEurope—excludesadd-ons;excludesloan-to-owntransactionsandacquisitionsofbankruptassets;basedonannouncementdate;includesannounceddealsthatarecompletedorpending,withdatasubjecttochange;geographybasedontarget’slocation;Asia-Paciic—includesbuyout,growth,early-stage,privateinvestmentinpublicequity,andturnarounddeals;excludesadd-ons;excludesrealestate;dealvalueexcludesdealswithannouncedvaluelessthan$10million;includesinvestmentsthathaveclosedandthoseatagreement-in-principleordeinitiveagreementstageSources:Dealogic;AVCJ;Bainanalysis

Dealsofallkindsfelttheimpact,butthosethatdependedonbankfinancingsufferedthemost.Asyieldsonlargesyndicatedloansapproached11%intheUSand9%inEurope(both10-yearhighs),banksretreatedandissuanceofnewloansplunged(seeFigure6).

Thelackofaffordableleveragecutthenumberofmegadeals—thoseover$5billion—byalmosthalf,andtheaveragedealsizedroppedto$788million,downfromthepeakof$1billionin2021.Buyoutsbroadlysawdoub