Private equity: Deals 2022 midyear outlook

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Steady deal volume after big year for private equity

The onset of new risks — inflation, rising interest rates, geopolitical turmoil, increased government scrutiny — has contributed to the surge in volatility and slowdown in private equity (PE) deals in 2022. During the first half of the year, volume declined by 26% to 1,626 deals from 2,184 deals during the same period last year. While deal volume was still strong during the first quarter, most of the decline in the first half of the year was due to the second quarter, when volume fell precipitously.

The near-term investing climate is likely to be a test for this generation of private equity firms, most of which saw their fortunes increase in the last decade. Performance could start to diverge as the cost of debt rises and exits are more difficult. However, we expect activity to recover given record-high levels of dry powder (US PE totals $975 billion). Due diligence will be a key safeguard against volatility and possible regulatory action.

Source: Preqin (data as of May 2022)

“What I would argue as a much more ambitious value creation agenda at many private equity funds – leveraging cloud technology and data and analytics to drive insights quicker, as well as a tremendous amount of focus on talent, both the development and retention of talent, both at portfolio companies and the fund itself.”

— Manoj Mahenthiran, Private Equity Leader

Key deal drivers

Corporate take-privates

Falling public valuations make for attractive targets for private equity. In recent years, special purpose acquisition companies (SPACs) emerged to take firms public. PE firms will now leverage their dry powder to reverse the trend.

Public divestitures

There’s too much uncertainty in the market and public companies will focus and streamline their businesses as their valuations fall. These firms will also need cash. Private equity can step in to buy non-core and/or non-performing assets.

Ambitious transformation

The old playbook of cost takeout and growth through acquisitions will be insufficient and private equity will need to dig deeper for value creation. Many firms will be on the hunt for major transformational opportunities — harnessing new technology, digitizing, etc. — that can succeed, despite volatility and potential government scrutiny, to drive top-line growth.  

Talent retention and inclusion

Successful acquirers in this market should pay attention to the needs and aspirations of the workforce which will be a key force behind hitting deal objectives, from delivering business growth to societal benefits. Earning the trust of diverse employees can be a road to creating the organizational performance stakeholders are demanding.

Contact us

Manoj Mahenthiran

Manoj Mahenthiran

Private Equity Lead, PwC US

Bart Spiegel

Bart Spiegel

Deals Partner, PwC US

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