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2022 / 2023 Global Private Equity Highlights
Market Turbulence
The market turbulence that began in early 2022, which has led to hurdles in private equity (PE) dealmaking. Despite this, PE firms were well-positioned for a downturn with stockpiles of dry powder and experience in turning distressed companies around.
Global Deal Activity
Global deal activity in 2022 did not exceed the levels reached in 2021. However, total deal value reached USD 2.8 trillion, marking the second-highest year on record. There were 16,989 deals closed, signaling that firms are continuing dealmaking despite initial widespread pessimism.
Economic Uncertainty
As we move through 2023, economic uncertainty persists. Exits remain slow and investors are evaluating their allocation strategies, which will dictate fundraising levels and liquidity positions for firms.
Add-on Activity
The current market environment has bolstered add-on activity as firms seek inorganic growth opportunities and have an array of companies with discounted valuations to choose from.
PE Multiple Contraction
Company valuations are experiencing further downward pressure in 2023. The median EV/EBITDA for buyout deals has declined moderately since 2020.
Role of Debt
The median debt percentage has hovered below 50 percent since 2018. Prolonged higher borrowing costs are leading firms to close deals with smaller debt facilities or greater equity contributions.
PE Exit Activity
Global PE exit activity took a steep dive between 2021 and 2022. However, total exit value in 2022 was less shocking when compared with earlier years.
Public-to-Private Deals
Public-to-private deal value doubled in 2021 and rose an additional 47.9 percent YoY in 2022, exceeding USD 300 billion for the first time.
Add-ons
Add-on deals can allow target companies to maximize their value and achieve better outcomes than other exit types currently offered. Add-on deal value nearly doubled between 2020 and 2021.
Looking Forward
Firms are finding their footing as the market downturn establishes a longer-term presence. Prolonged economic uncertainty will likely manifest as a lower level of deal activity over the next few quarters while the PE ecosystem maintains a commanding presence in the private markets.
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