• Rethink - Private Equity

Rethink - Private Equity

Private equity has rarely found itself been in a more opportune – but also challenging – time.

Trillions of dollars in dry powder await deployment, and focus has shifted from supporting portfolio companies through the pandemic to prospecting and executing new deals. 42% of fund managers polled in BDO’s autumn 2021 Private Equity Pulse Survey are looking to direct most capital to new deals, compared to 19% in the fall of 2020.

PE companies have massive amounts of dry powder and see a resurgence of leveraged buyouts and new opportunities, including in the secondary market. Furthermore, high-quality targets across many industries are actively looking for investors to grasp growth opportunities.

With that in mind, 2022 and beyond looks like an exciting time for private equity.

However, there are also challenges. Supply chain disruptions, inflation, and higher interest rates make strong, flexible value creation plans a must-have. PEs that succeed amid global uncertainties and fluctuating risk landscape will be those able to accurately model risk, excel at portfolio composition and assist their companies with adapting to the market conditions.

Simultaneously, evolving regulations such as the taxation of the digital economy framework and changes to transfer pricing rules directly impact tax and auditory requirements – and projections. The same applies to the increased focus on ESG and impact investment among PEs and LPs.

Sustainable business practices that mitigate risk and improve performance while optimising a company's positive social and environmental impact is unquestionably a boon but also means a need to identify and implement new reporting standards to avoid the risk of greenwashing.

To succeed, PEs will continue pushing for increased digital transformation, both in portfolio companies and internally. The PE firms best equipped for the future will be those that understand both the potential in advanced technologies such as AI and predictive analytics and forecasting to optimise value and returns on investment.

BDO’s Global Private Equity team supports PE firms, portfolio companies, and businesses seeking PE investment with a full spectrum of professional services. We help companies react to the immediate challenges, increase resilience, and realise the potential of future investments, existing portfolio companies, and the PE companies themselves.