Private equity: Deals 2022 midyear outlook

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)}