First-half private equity fundraising and deal activity continued a declining trend, with only IPOs increasing slightly off a low base. LPs are consolidating and upgrading portfolios, and GPs are focusing on existing portfolio management with a view to eventually increasing exits and distributions.
2Q23 private equity activity, from fundraising to exits
Fundraising | Final closes for private equity partnerships in 2Q23 totaled $170 billion of commitments in 470 partnerships. (Unless otherwise noted, all data in this commentary come from PitchBook.) The dollar volume was down 2% from 1Q23, but the number of funds rose 7%. For the first half, commitments are running 31% behind those of a year ago, with the number of funds down by 51%, and with venture capital commitment volumes falling most notably from about 34% a year ago.
Buyouts | New buyout transactions by count fell 13% from 1Q23 to 2,462, and disclosed deal value declined 18% to $122 billion. 1H23 numbers also saw declines of 30% in number of investments and 36% in disclosed value. YTD average buyout prices fell almost a turn (0.9x EBITDA) to 13.4x but remain high on an absolute basis. Average leverage levels YTD fell to only 31% of new deal capital structures, with interest costs rising and impinging company profitability.
VC Investments | New rounds of financing in venture capital companies totaled 9,955, with $86 billion of announced value. The number of investments preliminarily fell 20% from 1Q23, but announced value fell only 1%. 1H23 numbers plunged 33% for rounds and 48% for disclosed value compared to 1H22.
Exits | There were 472 private M&A exits of private equity-backed companies, with disclosed values totaling $90 billion. The preliminary private sale count fell 21% and the announced dollar volume dropped 13%. There were 46 private equity-backed IPOs in 2Q23 raising an aggregate $7 billion, up 15% by count, with issuance leaping 40% from 1Q23.
Venture-backed M&A exits totaled 541 transactions with disclosed value of $14 billion. The number of sales declined 18% from 1Q23, and announced value plunged 50%. There were 86 VC-backed IPOs in 2Q23 with a combined float of $12 billion; the count was up 19% and the issuance grew 71%.
Returns | With a nice uptick in public equity markets in the last two quarters, private equity lagged in both periods but posted modestly positive returns in each. Tech-heavy venture capital and growth equity funds have been the greatest laggard for the past six quarters, with buyouts marking gains of about 3.5% in both the last two quarters.
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