Global private equity industry preparing for choppy waters ahead

15 August 2022 3 min. read
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Despite record levels of dry powder, the global private equity industry is starting to feel the heat of the turning economic tide, with both deal volumes and fundraising levels down on the previous year, according to the latest private equity report from Bain & Company. 

In the first half of 2022, private equity generated $512 billion in buyout deal value, lower than buyout deal value in 2021, but still relatively high compared to previous years.

Deal count surpassed the 2,000 mark, meaning that 2022 still could be on track to produce the second-highest annual total ever behind 2021’s all-time record.

Buyout deal value

But given the growing impact of geopolitical and economic uncertainty, and the cyclical nature of the private equity sector, financial investors are not expected to maintain their activity in the second half of the year.

“As we shift into the year’s second half, activity is slowing down. Deal pipelines in many sectors are softening, in technology especially, and debt is becoming more expensive. Facing losses on loans committed before the slowdown, banks are asking a lot more questions about a company’s exposure to inflation and rising rates, making it harder to close transactions,” explained Hugh MacArthur, leader of Bain & Company’s Private Equity practice. 

Number of exits

Similarly, public market woes in 2022 have already had an impact on exits. Global buyout-backed exit value hit $338 billion in the first six months of the year, a decline of 37% from the same period a year ago. 

Global IPO value, including buyout-backed and other, came in at $91 billion, a 73% decline versus the first half of 2021.

Global IPO volume

“As this period of turbulence wears on, the slowdown will likely extend to exits across the board. The exit falloff will increase average portfolio hold periods,” said MacArthur.

A similar picture can be drawn for fundraising. A number of large funds were still able to close during the first half of 2022, but global fundraising showed a sharp decline, especially among buyout funds. Private capital raised globally came in at $645 billion versus $789 billion during the first half of 2021. Buyout fundraising dropped from $284 billion to $138 billion for the same time period. 

Fundraising by private equity

With not all funds added put to work, dry powder has hit its highest level in history, at $3.6 trillion. While considered an untapped opportunity from the perspective of investors, the large volume of dry power at the same spells opportunity for private equity funds. 

“Deals done coming out of recessions tend to deliver strong returns, something both general partners and limited partners learned in the wake of the global financial crisis,” said MacArthur.

Dry powder

Previous research from Bain & Company has shown that the internal rate of return from investments made during recovery years has consistently outperformed the long-term averages, especially investments in top-quartile deals.


Looking ahead, MacArthur said that the sector will have to brace itself for a “period of storm”, and manage value creation and changes to their portfolio proactively. “That will be critical in weathering this period of turbulence and taking full advantage of the recovery to come.”