It’s no secret that M&A deal activity started slowly in 2023. So, I was delighted to note in EY's 1Q 2023 Private Equity Pulse that March saw US$62bn in PE deals announced (whereas January was ~US$12bn, and February ~US$19bn).
Beyond the pleasing uplift, I found some of their other trends super interesting - these are what caught my eye:
💡 PE RESILIENCE & FLEXIBILITY
Arguably, the private equity sector is better equipped than ever before to handle market volatility with more than US$1.2t in available capital, plus widely expanding operating toolkits.
In the face of macro headwinds and material instability in the banking system, PE firms are adjusting their focus to investing in long-term growth stories and companies with temporarily mispriced valuations.
💡 TAKE PRIVATES DOMINATE
Take-private deals dominate, representing over 80% of total PE activity by value so far in 2023 – as PE firms invested into high-quality assets which they believe are temporarily mispriced.
💡 TECH THESIS
Tech-focused deals, particularly in software, account for 50% of PE's deployment this year, with opportunities in areas such as cybersecurity, AI/ML, climate-tech, and supply chain analytics.
💡 MUTED EXITS
Exit activity remains muted due to limited appetite from corporate acquirers and a mostly closed IPO window. However, EY notes that PE firms remain ready for when the IPO window reopens.
💡 OUT OF ADVERSITY
The challenging operating environment has catalysed private credit funds to step forward as PE’s traditional lenders stepped back. EY predict credit funds will continue to work together on larger deals.
PE secondaries are also gaining traction but remain a fraction of the overall primaries market.
As fundraising becomes more challenging (funds raised fell by 14% in Q1 versus the prior quarter), larger firms will target investors new to the asset class; blockchain and the tokenisation of assets will be powerful enablers to unlock investor populations previously untapped.
From DataDiligence’s perspective, these trends all lean into the inherent need to get pricing right from the onset. And data assets MUST be a part of this valuation of today, and tomorrow's potential.
Data due diligence enables investors to assess data risks, scalability, and functionality, plus the all-important data uses cases and potential monetisation possibilities. And test these against their investment thesis.
And if a data due diligence wasn’t done pre-acquisition, a data diagnostic (which is a very similar process) helps management teams assess data maturity and risks to their business strategy. Then align on the investment and priorities required to craft and better implement their data strategy.
If you need advice on how to assess and value data assets, don’t hesitate to call us.