PE Pulse: Five takeaways from 2Q 2022

In this episode, Pete Witte, EY Global Private Equity Lead Analyst, explores the key themes and market dynamics from 2Q 2022 that are top of mind for PE investors.

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PE Pulse is a quarterly report and corresponding podcast miniseries that provides analysis and insights on private equity market activity and trends.

Visit the Private Equity 2Q report to view this quarter’s summary and infographic.  

Companies of all sizes may need to continually assess where outsourcing can create value for stakeholders. Areas that are not core value-creating activities and those where the company lags in technology or cost efficiency can be strategic outsourcing candidates. 

Five takeaways from 2Q 2022:

  • The environment has changed pretty dramatically since the last time we did this back in March – inflation in the US and Europe has spiked to about 8-8.5%; we expected that interest rates would move higher, and now they; and global markets heading into widespread corrections, and in some cases – the US notably, actually moving into bear market territory.
  • PE deal activity decreases 27% from 1Q 2021: despite a softening in activity from the breakneck pace of last year, this level of activity is still quite robust.
  • From a fundraising perspective, we’ve seen declines of a similar magnitude – down about 15% in the first half of this year versus last.
  • Valuations have risen monotonically in recent years, they topped out at about 11.5x last year, and a lot of deals – especially in the tech space and with growth equity deals – trading much higher.
  • PE firms still have US$1.2t in dry powder, so they’re not going to be capital constrained. LPs are committed to the asset class and are not market timers – they’re going to continue to do their best to invest at a steady pace.  

So, to wrap it up – market volatility, inflationary pressures, and rising interest rates certainly make the landscape a lot different than it was six months ago. That said, we think that firms will stay active despite the increased uncertainty.

For your convenience, full text transcript of this podcast is also available.


Episode 53