Letter from the Editors

At the beginning of the year, we noted in our Private Equity Report: 2023 Outlook the considerable macroeconomic and geopolitical challenges facing private equity. As we pass the year’s midpoint, those challenges continue to hang over the private equity industry like a stalled weather system, refusing to dissipate, as existing obstacles have solidified and new hurdles have emerged. While the crisis around the collapse of Silicon Valley Bank, First Republic Bank and Signature Bank was not protracted, it nonetheless compounded an already difficult liquidity environment. Fundraising remains highly competitive. The polarization around ESG in the United States has intensified, resulting in a patchwork of wildly different state legislation. The SEC continues to take aim at private fund practices, while in the EU, new regulations stand to complicate both fundraising and the M&A landscape. In this environment, caution rules the day for both sponsors and investors.

And yet, with creativity and persistence, deals are getting done. Lenders are adjusting their balance sheet exposures. Direct lending and co-investments, as well as innovative deal structures, help to fill the financing gaps caused by the pull-back in syndicated debt financings. Brand-name funds are weathering fundraising headwinds by offering incentives and flexibility with terms, while first-time managers are building track records by raising capital deal-by-deal. And through it all, bright spots have begun to appear. The U.S. IPO market is showing early signs of thawing. In Latin America, proactive monetary policy, the move toward nearshoring and a spate of welcomed governmental reforms give reason for optimism. And while investors continue their caution regarding China, other Asian markets such as Japan, Australia and India are showing healthy levels of activity.

We hope you find the 2023 Private Equity Midyear Review and Outlook to be a helpful summary of both the various forces shaping the industry and the strategies market participants are using during this dynamic time.