Five sectors top of mind for dealmakers in 2024: Food, entertainment, accounting, direct care and onshoring | PE Hub

Good morning dealmakers, it’s Obey Martin Manayiti with the US edition of the Wire from the New York newsroom. I am bringing you PE Hub’s final Wire of the year, and I’m sharing highlights from our sector-based coverage throughout 2024.

We recently looked at factors that drove PE investments throughout the year and that we expect to be at the center of dealmaking in 2025. Today, I will look at the trends that drove PE deals in five of those sectors.

As we are in the festive season, we will start with opportunities that PE firms identified within the food industry, and then we will focus on the entertainment sector.

Next, we will shift gears to look at what’s driving PE-backed CPA deals, before switching to factors behind deals in the healthcare sector.

Finally, we will look at the growing appetite of dealmakers to capitalize on onshoring and nearshoring trends. This will likely be a major trend in 2025 if the incoming US administration makes good its threat to impose tariffs on its trading partners.

Food, Glorious Food

The food and beverage sector has had to adapt to changing customer spending habits due to inflation and interest rates, writes my colleague Nina Lindholm. Private equity has managed to find attractive trends within the market, despite these challenges, and the sector has seen plenty of deal activity in 2024.

That pace is set to continue, according to James Scallan, managing director at Houlihan Lokey. “Suppose inflation remains cool and interest rates stabilize,” said London-based Scallan. “In that case, we can expect to see a continued resurgence in dealmaking, particularly from private equity, which has been patiently waiting for the right moment to re-enter the market.”

Lower interest rates would make leveraged buyouts more attractive, Scallan said, adding that as inflation eases, investor confidence in profit sustainability will improve, unlocking more opportunities and levers for growth.

Frozen foods, healthier choices and functional beverages are among the sectors that are appealing to dealmakers as we head into 2025.

That’s entertainment

Private equity investing in the media and entertainment sector became more diversified in 2024 as dealmaking expanded beyond the traditional Hollywood content hubs, although the latter remained a prime enticement, according to my colleague Iris Dorbian.

Whether this was attributable to the “Hollywood contraction,” a term coined by entertainment trades and insiders to describe industry-wide job losses, salary cuts and fewer shows in production, can only be speculated. Yet even with these disruptions, dealmaking continued at a robust pace.

Multiplatform content creators, music catalogs from veteran or iconic recording artists, and a bet on talent agencies are some of the trends that drove PE-backed entertainment in 2024. Those trends will likely continue in 2025.

Closing the books

Accounting firms have been attracting PE investments all year. Major deals in the sector included the acquisition of Baker Tilly by Hellman & Friedman and Valeas Capital Partners, announced in February, and New Mountain Capital’s investment in Grant Thornton, which closed in June.

There were dozens of mid-sized and smaller targets too, and we are expecting more deals in this sector in 2025. In February, PE Hub rounded up five PE-backed CPA deals, and in October, we rounded up another six.

The three forces driving deals in the sector are: increased regulations, a shortage of skilled labor and market fragmentation.

“We believe growth trends in the CPA space are compelling,” Jason Barg, a partner at LMP said. In October, his firm invested in Cohen & Company. “We are living in a world with growing regulatory complexity and the need for best-in-class advice is more pronounced than it has ever been.”

Patient direct care

PE Hub saw a steady stream of deals in the home-based care sector all year, writes my colleague John R Fischer.

“With the rise in chronic conditions, a rapidly aging population and an increased focus on patient-directed care, the need for high-quality, home-based healthcare solutions is more critical than ever,” said WellSky chairman and chief executive officer Bill Miller when the health and community care tech company bought Bonafide, an enterprise software solution for durable medical equipment and home medical equipment companies. WellSky is backed by Leonard Green & Partners and TPG.

Patient preferences play a big part. Value-based care models aim to improve the quality of patient care. A key component is patient-directed care, which prioritizes patient needs and preferences to enhance experiences. For many, going to the hospital and doctors’ offices can be stressful and, in some cases, impossible, making it necessary for healthcare practitioners to come to them.

Greater specialization is another factor driving PE investments. Chronic conditions are becoming more prevalent in both adults and children, ushering in the need for more specialized services both in hospital and at home.

Onshoring

Over the last couple of years, PE firms investing in industrial and manufacturing sectors have been betting on onshoring and nearshoring trends. In 2022 and at the peak of the global supply chain crisis, PE Hub took a deep dive into the onshoring trend to explore how PE firms were seizing on the theme.

A few years later, there is anticipation that the trend will continue. Pent-up demand, threat of tariffs and government incentives to set up businesses in the US are some of the factors contributing to the growth of this trend.

For instance, the incoming Trump administration has vowed to impose tariffs on certain countries that import goods to the US. This can create opportunities for domestic manufacturers that compete with foreign companies for the US market.

“Strategic buyers with domestic manufacturing capabilities are in a good spot here,” said Jeremy Tancredi, a partner at digital services firm West Monroe, in a recent interview with PE Hub. “They could look at these acquisitions as an opportunity to acquire targets that are producing similar products domestically, providing an opportunity to bring their production to the US and reduce risks tied to overseas manufacturing.”

That’s it for me today. As always, I’d love to hear from you at obey.m@pei.group

Editor’s Note: There will be no daily PE Hub Wire newsletters from December 25, 2024 until January 2, 2025, as PEI Group is closed for the holidays. On behalf of all of us at PE Hub, we’re wishing you happy holidays!

Obey