Private Markets investing in 2022 has been quite a ride.
From heady times as the year began, through sudden turmoil following Russia’s invasion of Ukraine and the subsequent fallout over inflation, financing costs and the energy crisis.
Where do we stand today, as we come to the end of the year?
With exceptions, it is clear that fundraising and deal making in the short term have been tough for much of the year. If you happened to have secured a new fund just before the mood dipped, lucky you; if not, you are probably in a holding pattern, waiting for a new cycle to begin, and probably wondering when this will be.
In the deal cycle, many firms have pivoted resources towards portfolio value creation. This doesn’t mean new activity is dead – far from it. We know a great deal of work is going on, swan-like beneath the surface, aiming to be ready to pounce as quickly as valuations move or credit markets re-open; lessons have been absorbed from 2009 when many were just too slow to return to the market. Moreover, in the mid-cap space particularly, there have been some early signs that things may be changing – with vendors expressing a willingness to recognise valuations at a reduced level, and firms now willing to be bold.
On the recruitment front, it is a similarly mixed picture. We have some forward visibility from tracking the number of applications to our advertised roles, the number of CVs sent to clients and how these convert into interviews and offers. Parts of our international market have clearly been hit harder than others. I would draw attention to the UK mid-market, for example, where in my view the combined consequences of Brexit, Covid and political mayhem have added to the challenges. In contrast, our investor relations and ESG teams have never been busier; our Middle Eastern practice, serving many sovereign wealth funds, is on fire; and my own home market in DACH has been extremely resilient with 5-6 new mandates for everyone that has slowed down in the last few months. As a company, we are lucky to have this diversification and natural hedge.
Looking ahead, we carry strong momentum into 2023 in many of our key markets. Most commentators anticipate increased allocation to the asset class with LPs indicating a desire to deploy more in this space, so whether this is a 12 or 18-month blip, we remain optimistic and have a deep belief in the resilience of the business model.
In the deal cycle, many firms have pivoted resources towards portfolio value creation. This doesn’t mean new activity is dead – far from it. We know a great deal of work is going on, swan-like beneath the surface, aiming to be ready to pounce as quickly as valuations move or credit markets re-open; lessons have been absorbed from 2009 when many were just too slow to return to the market. Moreover, in the mid-cap space particularly, there have been some early signs that things may be changing – with vendors expressing a willingness to recognise valuations at a reduced level, and firms now willing to be bold.
On the recruitment front, it is a similarly mixed picture. We have some forward visibility from tracking the number of applications to our advertised roles, the number of CVs sent to clients and how these convert into interviews and offers. Parts of our international market have clearly been hit harder than others. I would draw attention to the UK mid-market, for example, where in my view the combined consequences of Brexit, Covid and political mayhem have added to the challenges. In contrast, our investor relations and ESG teams have never been busier; our Middle Eastern practice, serving many sovereign wealth funds, is on fire; and my own home market in DACH has been extremely resilient with 5-6 new mandates for everyone that has slowed down in the last few months. As a company, we are lucky to have this diversification and natural hedge.
Looking ahead, we carry strong momentum into 2023 in many of our key markets. Most commentators anticipate increased allocation to the asset class with LPs indicating a desire to deploy more in this space, so whether this is a 12 or 18-month blip, we remain optimistic and have a deep belief in the resilience of the business model.
So what might 2023 hold?
- The continued rise of impact and ESG themes
- Broader focus on diversity and inclusive workplaces
- Value creation skills are increasingly non-negotiable; expect a push on dedicated origination/sourcing as well
- Bigger spread than ever between top and bottom quartile performers
What will 2023 hold for PER?
- Building our activity and presence in the US market in particular, and developing stronger roots in France. Other market entries will follow
- Deepening our relationships with existing clients, looking to extend our services as experts across functional roles and geographies
- Continued investment in our own team: finding, training and developing people with the hard & soft skills to become leaders in our fast-growing niches
If you wish to swap ideas about how to strengthen your team, enter new markets or advance your career, please reach out for a conversation. And if you know anyone who would fit the PER culture of intelligent, empathetic people, let us know. We are actively hiring across our operations and offer a great career path.
Rupert Bell
Director of DACH
Director of DACH