Q1 2022 Middle Market Private Equity Update

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GCG’s Q1 2022 Middle Market Private Equity Update provides an overview of the latest trends in the private equity market.

Key findings include the following:

    • Private equity based deal values for Q1 2022 are down 16% from 2021 on an annualized basis, but up 17% from 2020. While 2022 is still a very active M&A market, it hasn’t been as active as 2021 thru Q1 2022.
    • Capital overhang, which represents the amount of uninvested capital raised by PE funds, continues to grow. The level of uninvested capital has accelerated into 2022 after reaching a record high of $826.9 billion at the end of 2021. This is part of our basis for the belief that 2022 to 2026 will be a hot M&A market led by private equity.
    • 2021 was one of the best years in middle market PE fundraising. The first quarter of 2022 showed a slowing level of fundraising as economic and political issues have become more significant. Fundraising has generally been growing since 2010, reaching a peak in 2019. 2021 saw an increase of 15% in capital raised but a decrease of 15% in the number of funds raised. 2022 through Q1 is on pace to decrease 17% in capital raised from 2021 and 15% in number of funds raised.
    • Deal multiples continued to increase into Q1 2022. Multiples increase during Q4 2021 to hit 13.7x EBITDA. This trend has continued in Q1 2022 as multiples hit 14.6x, a new recent peak. Part of this can be explained by the lower EBITDA for many companies during COVID.
    • As deal multiples rise, more equity is required in each deal. The median level of debt per deal is near its lowest point of the past seven years at 43.3%. We expect the debt level to ultimately be an inhibitor for further escalation of deal multiples, especially in a rising interest rate environment.

Click here for the full update.

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