2022 Global Private Equity Outlook  

November 09, 2021

A Report from Dechert and Mergermarket

In today’s scorching hot private equity market, creativity is king. With unprecedented levels of dry powder, record deal activity, and intense competition, dealmakers need to innovate to stay ahead of the curve. The 2022 Global Private Equity Outlook, an annual report co-published by Dechert LLP and Mergermarket, discusses how PE’s hot streak will fare going into 2022, what headwinds managers may need to navigate, and what strategies they can employ to succeed in the sector’s most active period ever.

The report includes insights from a survey of 100 senior PE executives in Asia, Europe and the U.S., including the following key findings:
 

Going for growth

Structured equity investments are on the rise, with 67 percent of North American survey respondents citing these as a key strategy for staying ahead of the competition. What’s more, 84 percent of respondents from all regions said their current fund invests in growth capital deals, with 62 percent having increased their interest in growth investment over the past two years.

Strategic secondaries

Turbulence resulting from the COVID-19 crisis alongside an upsurge in equity values has led to an increase in GP-led secondaries, which have become a major feature of the European and U.S. markets. Offering advantages to investors as well as GPs, the report details how these transactions have tackled pandemic-related disruption and why this trend is set to continue.

SPAC slowdown?

While the rise of SPACs coming into early 2021 is a familiar story, the tide may be turning. Despite two-thirds of survey participants either currently employing a SPAC, or planning to do so, SEC scrutiny and a wave of lawsuits underway may lead to a slowdown in new issuances.

The continued growth of ESG, and increasing cyber concerns

ESG’s meteoric rise up the corporate agenda is set to continue, with regulation in force now in Europe, and the U.S. likely to follow suit. Our research also showed that privacy and data security is a widespread concern for managers, with 69 percent of respondents now taking this into consideration when contemplating investments.

Divergence continues

The report highlights a continuing divergence between large well-established players, including multi-strategy asset managers, and smaller, mono-line or less well-established market participants, making it increasingly difficult for new entrants to establish themselves in the market. The sheer size of transactions is also witnessing a revival of club deals in the U.S., birthplace of the PE megadeal, with 53 percent of North American GPs anticipating the increasing prevalence of club deals in the pandemic’s wake, compared to 37 percent in EMEA and 30 percent in APAC.
 

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