Global PE deal volume was down by 28% year-on-year in Q1-Q3 2023 to 6,304 deals. This decline is not as dramatic as it first appears. Q1 2022 was the most abundant quarter on Mergermarket record for PE deals, and Q2 of that year was among the top six quarters, all of which occurred postpandemic. Total transaction value, meanwhile, has taken a sharp dive, falling by 45% compared with Q1-Q3 2022, to US$448 billion. While this drop in aggregate value has been more precipitous than the decline in volume, and reflects markedly tighter debt financing conditions, the market has essentially recalibrated to its pre-pandemic baseline following a frenetic couple of years. The US$145.3 billion in total value recorded in Q3 2023 represents a decrease of 6% on Q2’s US$154.4 billion. This was precipitated by a decline in deal count in Q3, after having held steady through H1.
However, the sharp dive in total transaction value, falling by 45% compared to the same period in 2022, reflects the impact of tighter debt financing conditions. It’s interesting that the market seems to be readjusting to its pre-pandemic norms after a period of heightened activity. The decline in total value from Q2 to Q3 2023, dropping from US$154.4 billion to US$145.3 billion, appears to be connected to a decrease in deal count in Q3 after a steady phase in the first half of the year. It will be crucial to watch if this indicates a potential stabilization in PE deal value.
Fundraising has returned to pre-pandemic levels. However, the number of buyouts remains low and larger funds have taken the lion’s share (79%). This landscape is anticipated to continued focus on larger funds, potentially consolidating investment in those bigger players. Mega-deals might not be on the rise, indicating a shift in investment strategies.
The caution around VC-backed IPOs could suggest a conservative approach to exits, but the optimism for an increase in VC fundraising indicates a belief in the potential of venture capital investments. This could mean more capital flowing into innovative startups and emerging companies.
Overall, it seems like there is a cautious sentiment in the market, with attention shifting towards more sizeable PE funds while maintaining hope for growth in VC fundraising, which could fuel innovation and new ventures.
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