Private Equity Pulse: On the Lookout for Entries
June 9, 2023 | S&P Capital IQ
Prolonged market downturns like the one that began in 2022 are widely believed to produce some of private equity’s best vintages, allowing funds to buy portfolio companies when valuations are down and ride the economic recovery to a strong exit.
So where are all the entries? The global private equity industry closed out 2022 with a near-record level of dry powder to deploy into deals, yet there remains a persistent gap between buyers and sellers on valuations after public markets’ dramatic fall last year. Tighter bank lending standards are likewise still an impediment to buyout deals, although the ability of firms to tap into private credit fueled a surge of take-private deals in the first quarter.
Dealmaking will build slowly as market participants regain confidence in the banking system and the economic outlook, Blackstone Inc. President Jonathan Gray told analysts on his firm’s first-quarter earnings call.
“I think it will happen in waves in different segments. It ultimately will happen, it always does. But it’s hard to point to any one thing as we sit here today,” Gray said.
Hopes that a turnaround might begin in the second half of 2023 are supported by data showing that private equity entry value jumped 55% in May over the previous month. But it is not all good news. Entry value was down year over year in May, as it has been every month of 2023 so far.
Source: S&P Capital IQ
