Private Equity Dealmaking in 2023
While private equity has often fared better than its publicly-traded counterparts under difficult economic circumstances, PE has still had to contend with significant headwinds. Results of macroeconomic factors — including the Russia/Ukraine conflict, supply chain issues, and rising inflation — have resulted in an overall slowing of deal activity in the second half of 2022. Global private markets fundraising overall declined by 11 percent to $1.2 trillion.
The middle market is not immune to such struggles — middle-market direct lending volumes have declined by 16% since last year. Portfolio company executives have felt these effects: 61.1% of our survey respondents have noticed fewer deals in the last year.
“We’ve certainly seen, at least in the latter half of 2022, a significant decline in the volume of deals getting done. It’s influenced by the fact that 2021 was a record year. The first half of 2022 included deals that started in 2021 and rolled over into 2022.”
— Bill Hunter, industry advisor and former CEO of Terra Nova Solutions
Though many challenges loom on the horizon, there are three that generally pose the greatest obstacles currently: finding quality assets, managing more difficult deal terms, and securing investments from more cautious buyers. However, these strategies can help to persist and even thrive in these conditions.