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Rising rates put a halt to private equity in 2022

2023-02-27T15:27:47.592Z


The number of transactions fell by 10% and the sector recorded a decline of $654 billion. Hit hard by rising rates, the global private equity market experienced a “ sudden turnaround ” in the second half of 2022, said Monday in a study by the consulting firm Bain & Company. The sector, mainly investment in unlisted companies, suffered last year: the number of transactions fell by 10% to 2,318, and the decline was 35% in value, to 654 billion dollars, according to aggregated data from B


Hit hard by rising rates, the global private equity market experienced a “

sudden turnaround

” in the second half of 2022, said Monday in a study by the consulting firm Bain & Company.

The sector, mainly investment in unlisted companies, suffered last year: the number of transactions fell by 10% to 2,318, and the decline was 35% in value, to 654 billion dollars, according to aggregated data from Bain, Dealogic and Preqin.

About two-thirds of these operations were completed before the end of June.

The second half of the year was the scene of a “

sudden drop

” in these transactions, such as fundraising from investors, observe analysts from the consulting firm.

The rise in the key rates of central banks on both sides of the Atlantic is the main cause, bringing in their wake a "

reluctance of banks to grant loans for large leveraged transactions

" (in English leveraged buy-out, or LBO), according to the study.

The biggest LBOs by value were the first to suffer.

The value of the largest deals (transactions, editor’s note) did not exceed 3 billion euros this year, unlike 2020 or 2021

”, notes Bain & Company partner Guillaume Tobler.

"

The difficulty in securing funding for mega-deals is one reason

," he adds.

Read alsoThe appetite of the French for private equity is growing

However, Bain analysts are reassuring for 2023, concluding that global private equity "

remains well positioned to continue its long-term growth

", with solid fundamentals.

The funds have around the world 3.7 trillion dollars of “

dry powder

”, money already raised and still to be invested.

Bain also expects individual investors to become more involved in this asset class.

Source: lefigaro

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