We’ve just published our Private Equity Midyear Report, and we wanted to highlight a few themes in this newsletter. We’ll also offer a deep dive during an August 2 webinar during which we’ll explore 2023 performance to date across a range of measures and talk about what’s ahead. For a comprehensive analysis of where the industry stands as Q3 gets underway, we encourage you to read the full report; you can also listen to the related Dry Powder podcast.

One data point that we discuss in the podcast involves multiples: What’s the trend in the U.S. versus Europe? Scroll to the bottom of this email for the answer.

Nothing is fundamentally broken, and the environment, while not attractive, is stabilizing. Which raises the question: What are investors waiting for? Dry powder abounds, but for dealmaking to come back buyers and sellers need to agree on what assets are worth. And for the industry to fully rebound, capital needs to flow back to LPs. That means getting money back through exits and other liquidity solutions. The industry can arguably afford to wait, but will things be any different 12 months from now?

With dealmaking and fund-raising slower, the volume of dry powder is holding steady at $3.7 trillion across all strategies, with about 75% of that defined as “fresh” (i.e., less than three years into the investment period). There are certainly challenges to getting deals done, particularly large deals, but private credit is increasingly stepping in as commercial bank lending remains tight.

If investments were down, exits were way down: 2023 annualized global buyout-backed exits are on pace to drop by 67% versus 2022, and exit count is tracking toward a 40% decline. With about 26,000 portfolio companies sitting in buyout funds, GPs need a schedule and a strategy to unlock the $2.7T in unrealized value those companies represent. A portfolio review entails sorting companies based on their performance, remaining upside, and what you need to believe for value assumptions to pan out.

LPs remain in a cyclical squeeze, with a large amount of existing unfunded commitments, cash flow in negative territory due to the sharp decline in exits, and a notable supply/demand imbalance as nearly 14,000 private capital funds seek to raise an aggregate $3.3T in capital.

We’ve taken a closer look at fund-raising and how top PE firms are taking investor relations to a new level by emulating best-in-class commercial organizations.

As the cost of debt goes up there is more pressure for earnings to follow suit. GPs will have to find a “second wind” for portfolio companies and boost EBITDA or settle for lower returns. Given how much has changed in the world since deals were originally struck, refreshing the value creation plan is often necessary for a company to achieve the next phase of sustainable, profitable growth.

Please register to attend this invaluable analysis of first-half performance and second-half outlook, during which we’ll cover the topics above and also provide an update on the macroeconomic trends affecting the industry.

When: Wednesday, August 2, 8:00–9:00 AM ET | 2:00-3:00 PM CET