PitchBook published last month a report showing that Private Equity is opposing the current volatility of the markets with less external (and risky) investment and more concentration on the growth of their existing portfolios. A trend also true for M&A.
Looking at PE, one can only conclude that after the great results of 2021, the trend is to downsize the volume of transation. That volume dropped by more than a half in 2022. Private equity buyout also dropped significantly.
With the pandemic, the war in Ukraine, high rates making it difficult to find loans. At a time when Banks in the Silicon Valley and even UBS are prooving more thank weak, our Industry concentrates on the existing assets : The volumes of investment are diminishing and they concentrate on add-ons shaping the growth of the existing portfolios.
This strategy allows the structuration of “champions” for certain industries, building on one of the strong acquisition of a fund. It is also a way of avoiding the “denominator effect,” ie, the drop of the value of one portion of a portfolio pulling down the overall value of a fund.
A trend that we will observe closely in the next month, at PE Cube.