#Privateequity and #venturecapital deal activity are down, Private Equity Wire has reported. It was to be expected. This economic funk we are all going through is as unique as it is universal. In all the years I have been monitoring private equity, things at the moment are seriously steeped in uncertainty.
Perhaps this is an unpopular opinion, but the lack of deal activity is in some way to be commended even if it was not intended. We aren’t dealing with Monopoly money here. This is pensioners’ money invested in many of these funds. Yes, private equity’s dry powder is piling up. But much better that buyouts and follow-on rounds are invested wisely and when the economic or lending conditions make more sense. No one wants to pay big fat deal fees for nothing.
There will have been many deal-specific reasons why Q1’s deal flow was stifled. That said, doing deal due diligence in 2023 must be a hair-pulling exercise especially when some large tech companies have seen their valuations slashed by more than 50%. How does one value a company in this market? Lend to it?
Despite being an intrinsically optimistic person, even I am not holding my breath that the IMF’s prediction of lower interest rates is enough to think we will see a spree of deals crossing the finishing line in the first half of this year. Having more alternative lending options in place for private equity-backed companies will help move the deal needle more in my estimations.
Sure, the deal data has made for some gloomy headlines. However, in this economy, I feel it’s what the deal data isn’t telling us that could shape the second half of 2023’s private equity deal activity. I am hoping for a pleasant surprise.