5 minute read 17 Aug 2023
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Private Equity Pulse: Takeaways from Q2 2023

5 minute read 17 Aug 2023
Related topics Private equity IPO

PE activity saw a modest uptick in Q2 on European resurgence.

In brief
  • The take-private activity that dominated the first part of the year has showed signs of abating.
  • PE firms will remain focused on acting opportunistically to invest in high quality assets in spaces with clear long-term secular tailwinds. 

Private equity (PE) activity climbed 15% in the second quarter versus Q1, with firms announcing deals valued at US$114b. The increase was driven by a steep rise in Europe, where firms announced acquisitions valued at more than US$38b, more than four times the amount announced in Q1.

Continued macro uncertainty weighed heavily on PE activity in the first part of the year, as firms grappled with the impact of rising interest rates and an overall uncertain economic outlook. Through the end of June, PE firms announced deals valued at US$213b, precisely in line with the second half of last year, but significantly less than the US$545b announced in the first half of 2022. 

Add-ons remain an important part of the market, accounting for 55% of deals by volume in the first half of the year, down from 60% last year.

At the larger end of the market, take private deals have been a powerful theme. In a typical year, roughly 20% of PEs deployed capital in such deals. In the first quarter of this year, nearly 70% of aggregate investment was in such deals as firms looked to capitalize on volatility in the public markets.

However, with markets stabilizing in recent weeks — in the US, for example, the S&P 500 rose more than 8% in Q2 — some of that bargain-hunting has begun to abate. Take-privates accounted for 42% of deal activity in Q2 — still high relative to historical standards, but off the record highs seen early in the year. Instead, firms are opportunistically focusing on a broader set of deal types including secondaries, carve-outs, and acquisitions of private companies, that had been largely absent in the preceding six months. 



of all PE deals were take-privates



of all PE deals were take-privates

Exit market moves higher on sales to strategics

Exits experienced a modest rebound in the second quarter as well, with firms announcing transactions valued at US$84b in Q2, up 42% by value from Q1. Activity was driven by a marked increase in sales to strategic acquirers, which grew nearly 90% from Q1. The IPO window remains largely closed despite a small handful of high-profile exits over the last several months including Lottomatica, backed by Apollo Management, and Savers Value Village, backed by Ares Capital Management. In aggregate, just 13 companies backed by PE firms completed IPOs in the first half of the year. 

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    PE exits in Q2 were muted, especially IPOs. Below is the complete data.

    Date Sales to strategics Sales to PE IPOs
    2021 Q1 $139.0 $72.4 $50.0
    2021 Q2 $200.9 $79.6 $44.4
    2021 Q3 $119.3 $73.5 $25.8
    2021 Q4 $122.3 $96.2 $18.4
    2022 Q1 $53.6 $55.2 $2.9
    2022 Q2 $249.7 $47.7 $1.3
    2022 Q3 $60.5 $26.4 $2.1
    2022 Q4 $92.4 $22.3 $2.2
    2023 Q1 $35.5 $22.1 $1.8
    2023 Q2 $66.9 $13.1 $4.0


As a result, firms and their investors continue to seek alternative sources of liquidity. According to Cobalt data, distributions from buyout funds in 2022 reached their lowest levels since the global financial crisis (GFC); just 14% of invested net asset value (NAV) was returned to investors, versus a long-term average of around 26%.

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    LP distributions as a percentage of NAV since the GFC. Complete data is below:

    Year Percentage
    2000 20%
    2001 12%
    2002 15%
    2003 25%
    2004 42%
    2005 42%
    2006 38%
    2007 33%
    2008 10%
    2009 8%
    2010 16%
    2011 20%
    2012 22%
    2013 25%
    2014 28%
    2015 30%
    2016 24%
    2017 29%
    2018 25%
    2019 18%
    2020 19%
    2021 28%
    2022 15%

Consequently, both limited partners (LPs), and general partners (GPs) on their behalf, are increasingly turning to the secondary markets in order to generate liquidity. A recent survey by Coller Capital found that more than three-fourths of LPs intended to use secondaries to generate liquidity over the next two years. Fundraising for vehicles focused on the space is on pace for a record year, a dynamic that’s in sharp contrast to the broader fundraising market; so far this year, secondaries funds have raised more than US$32b, with additional large-scale closes expected to add to the total in the coming months. Anecdotal reports are also accumulating about the increasing use of NAV loans by GPs. These fund level facilities, generally secured by portfolio assets, can allow for liquidity in a period of constrained exit activity.

Tech, health care, consumer, and financials: all remain powerful themes

Tech remains a powerful theme — in the first half of last year, tech deals accounted for one-quarter of PE’s total spend; in the first half of this year, the percentage grew to more than one-third, the result of PE’s take-private push in the early months of the year. Cybersecurity remains a prominent area of focus as companies continue to increase their cyber budgets, and favorable valuations coupled with stable business models characterized by low client churn and high margins provide further tailwinds.

PE firms continue to see opportunities in a number of key sectors including tech, health care, and financials:


Percentage of deal value – H1 2022

Percentage of deal value – H1 2023

Percentage of  deal volume – H1 2022

Percentage of deal volume – H1 2023



8% 23%




14% 6% 7%



14% 10% 9%



3% 10% 8%



14% 11%


Oil and gas


1% 1% 1%

Real Estate


1% 3% 1%



1% 2% 3%



35% 29% 25%



3% 2% 1%
Utilities 8% 5% 3% 3%

Health care remains another key space, with firms devoting 14% of spend to the sector. Specialty medicines, direct-to-consumer drug delivery models, and other spaces are all attracting interest from PE.

Consumer-focused targets has seen increased activity as well, although average ticket sizes remain comparatively low. Undervalued carve-outs in the packaged goods sector and agribusinesses with headroom for growth from tech integration are among spaces where firms are focused. 


PE firms raised US$104b over the course of the quarter, for a total of US$209b over the first half of 2023. This represents a 16% decline from the second half of last year, and a 26% decline from the first half of 2022. The impact of the denominator effect, wherein LPs become overallocated to private markets by virtue of steep declines in their public market holdings, and the challenges exiting investments continue to weigh heavily on new commitments.

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    The above bar chart shows the reduction in fundraising for the first half of this year. Complete data is below:

    Month Amount
    Q120 $139.72B
    Q220 $73.75B
    Q320 $92.85B
    Q420 $181.89B
    Q121 $155.81B
    Q221 $180.01B
    Q321 $133.67B
    Q421 $160.85B
    Q122 $128.11B
    Q222 $155.46B
    Q322 $106.75B
    Q422 $143.56B
    Q123 $105.09B
    Q223 $104.18B

Investors continue to favor larger managers and larger vehicles — in the second quarter, nearly half of all capital commitments were raised by a small handful of US$10b-plus funds. Despite the challenging fundraising environment, most private equity funds continue to have ample capital at their disposal, and the industry as a whole is highly unlikely to become capital-constrained in any meaningful way – in total, PE firms have nearly US$1.3t in dry powder available to fund new deals. 


While many economists have been calling for a recession for more than a year now, underlying macro performance has remained, in many ways, remarkably resilient. Inflation has moderated without the dramatic impacts on unemployment that many expected, and regulators have responded to shocks in the banking sector swiftly and decisively, ameliorating fears of systemic contagion, at least for the time being. The dichotomy of today’s operating environment — and the challenge for PE — is that these recessionary expectations are creating a stasis of uncertainty that’s keeping many participants locked in wait-and see mode.

PE firms will remain focused on acting opportunistically to invest in high-quality assets in spaces with clear long-term secular tailwinds — software, media, logistics, and health care, for example. They’ll continue their expansion and emphasis on additional asset classes, including secondaries and credit. In credit for example, the accelerated expansion of that asset class — which began in earnest last year when the large banks stepped away from financing PE transactions — will continue, with more companies in the middle market and upper middle market space turning to credit funds for their everyday borrowing needs.

Most important, they’ll remain focused on pulling all available operational levers to ensure that existing portfolio companies not only survive today’s macro uncertainty, but are positioned to outperform as economic growth begins to accelerate. 


PE activity ticked modestly higher in the second quarter, although macro uncertainty continues to weigh heavily due to considered factors.

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Related topics Private equity IPO