PE Trends 2022: H1 Overview, H2 Predictions & Riding Out the Storm

PE Trends

Overview H1 2022

The PE market has experienced some slowdown as stock markets feel the full impact of a turbulent start to the year mired by inflation, rising interest rates and trade tensions. But private equity is better insulated after years of fundraising and plenty of “dry powder” (unspent capital) in reserve. As a result, it does not, as yet, appear to be as affected as previously anticipated. But that may change…and soon.

US PE Trends

The US Private Equity market is surprisingly crowded despite macroeconomic tensions and as the Federal Reserve continues to sell bonds and raise interest rates. In the first half of 2022, US PE firms closed $176 billion over 191 funds. At this rate, the total value of US PE funds could surpass 2021’s total of just under $340 billion over 577 funds.

Europe PE Trends

Likewise, the European PE market has shown resilience in the first half of 2022 closing an estimated $436.5 billion over 4053 deals. This surpassed 2021’s H1 figure marking a 35% increase in funds and a 16% increase in deals year-on-year.

Why did PE deals boom in H1?

One theory is that with publicly traded companies tanking in value, they now make for attractive targets in the private market. In 2020, we saw a boom in Special Purpose Acquisition Companies (SPACs) taking firms into the public market, but now the trend is reversing to some extent.

The tech industry, in particular, made headline news earlier this year as valuations were slashed across the board, piquing interest in venture capital

Will It Continue?

Experts warn of the “looming risk” to PE investors as the effects from the public market trickle-down to the private market. PE should not be considered a safe harbour from the economic cycle.

Inflation rates are continuing to rise across the western hemisphere, and just this week, the Bank of England warned that they are expecting a recession before the year is out. US forecasters are also predicting a US recession lasting two years starting as early as September and peaking in October.

Short Term Consequences

In the short term, we are already seeing some of the effects on private equity with a slowdown in fundraising and an increase in dry powder. In addition, there is evidence to suggest that private companies are beginning to experience valuation pressure as investors become more cautious.

Long Term

However, despite the recent slowdown, the long-term outlook for Private Equity continues to look strong as PE returns for limited partners continue to outperform other assets. Meanwhile, general partners are set to ride out the storm with ample stores of “dry powder”.

What Does This All Mean for Private Equity Firms?

Boom and bust cycles present unique challenges but also incredible opportunities. Out of crisis comes innovation and private equity firms that are able to adapt their strategies will be the ones that come out on top.

Now is the time to be nimble, strategic and focused on due diligence when assessing potential investments. In a market where values are rapidly changing, it is more important than ever to have a clear understanding of the risks and opportunities involved.

As public valuations fall, companies will be looking to streamline by divesting non-core assets, creating a buying opportunity for PE firms.

As growth through acquisition becomes more challenging, Private Equity firms will need to look elsewhere for value creation. PwC reports that companies will benefit from finding transformational opportunities amongst their portfolio companies. This will require private equity firms to have an active and hands-on role in value creation.

Talent acquisition and retention is another focus area for private equity firms. With the right team in place, portfolio companies will be easier able to hit deal objectives.

In order to make informed decisions, private equity firms and their portfolio companies will need to rely on data and analytics more than ever before.

Symanto technology

At Symanto, our suite of flexible and highly accessible tools can help private equity firms and their Portcos get unique, real-time insights into a range of areas including market trends, customer sentiment and employee engagement.

Our technologies are used to spot growth opportunities, conduct due diligence, and measure market sentiment using text analysis from social media, review data, CRM data and more.

For example, our aspect-sentiment technology enables you to analyse customer sentiment by topic, and compare it against your portco’s main competitors. Symanto technology turns unstructured data into intuitive data visualisations to enable you to quickly and easily identify challenges and opportunities for growth.

At a time when talent retention is more challenging than ever, Symanto can be effectively used by HR teams to identify issues early on and take corrective action.

In conclusion

The private equity industry is facing some challenges in the current climate, but there are also opportunities for those that are able to adapt their strategies and make the most of emerging data analysis technologies.

Get Started With Symanto

If you would like to learn more about how Symanto helps companies make better-informed, data-based decisions, get in touch.