Bain & Company: Global private equity report 2023

(The full report can be downloaded here.)

It’s easy to think of Dickens and A Tale of Two Cities when looking back on 2022 (although I think we are in a cycle that exceeds the boundary of a calendar year). The first six months resembled 2021’s record-breaking activity: incredible numbers of deals, lots of exits, and substantial funds committed to the chase for the next five years.

Then something happened in June—in short, the Federal Reserve happened. The move to raise interest rates by 75 basis points, and then keep raising them, was a shot heard round the world, signifying the end of cheap debt in buyout markets and sparking strong concerns about persistent inflation. The rate increases fueled speculation about recession, which, in turn, spooked banks from providing leveraged loans. The dominoes fell from there, toppling year-end totals for deals, exits, and fund-raising. The “pause” has continued into 2023, and its persistence will be determined by how quickly macro factors stabilize.

The trends changing the PE landscape that we look into deeply this year include the real and imagined impact of web3 on investment markets, the drive for individual or retail capital by GPs, and what the great energy transition really means for investors. Lastly, we peer into our crystal ball to gauge the impact of persistent inflation on PE portfolios and come up with a rather counterintuitive but simple solution to preserve returns for LPs.

We hope you enjoy our Global Private Equity Report 2023, and we look forward to seeing many of you in person this year.