PE set for rebound

Global private equity remains set for further strong, long-term growth, even in the face of a sudden reversal in 2022, driven by economic turbulence and uncertainty amid rising inflation and interest rates, according to Bain & Company’s 14th annual Global Private Equity Report.

The report highlights that last year was still the second strongest in private equity’s history, despite an abrupt mid-year derailment of dealmaking, exits and fund-raising, triggered by a series of interest rate hikes by the US Federal Reserve in response to sharply higher inflation.

While the setback from June, after unprecedented macro shocks, conspired to slow dramatically what had been a decade-long, consistent and attractive run for the PE industry, the Bain study finds that the sector’s underlying fundamentals remain strong and resilient.

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Bain concludes that unlike the period from 2007-08, when the global banking system came close to collapse, nothing is fundamentally broken in the underpinnings for PE’s future expansion and current conditions are nothing the industry hasn’t dealt with successfully before.

Examining present and future challenges for the industry, Bain’s analysis highlights that clear strategic “sight lines,” rather than economic conditions, are what will bring energy back to dealmaking even if interest rates remain higher for longer.

Noting that the industry ended last year with a record $3.7 trillion in dry powder, Bain’s report emphasises the lessons from the last downturn, during which investors didn’t panic but focused instead on risk management and mitigation to set themselves up to accelerate out of the weaker period. Leading players will keep finding deals that they can underwrite accounting for macro conditions and will stay aggressive, the analysis finds.

Source: Private Equity Wire

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