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Center For Investment Excellence
Opportunities in private equity
May 31, 2023
Global Market Strategist David Lebovitz and J.P. Morgan Asset Management's Global Private Equity Group Co-Heads Stephen Catherwood and Ashmi Mehrotra discuss valuations, sector preferences, the secondaries market, and more. Topics include challenges faced by venture capital and buyouts in 2022, exponential growth of the private equity secondary market, and pros and cons of GP leads and LP leads.
27:16
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Quick takeaways
- Valuations and activity in the venture capital market were affected by valuation compression, while buyouts remained strong with decreased deal volumes due to tightening debt markets.
- In the buyout market, small and mid-sized deals are preferred for their focus on quality and stability of cash flows, while industries with defensible and resilient earnings are favored. In venture capital, early-stage companies with compelling opportunities generate outsized returns.
Deep dives
Performance and Valuations in 2022
In 2022, the venture capital market experienced a significant change, with valuation compression of high growth technology stocks leading to challenges in getting deals done. Valuations were high as the public market corrected, causing a contraction in overall activity. On the other hand, buyouts had a different market dynamic, with activity staying strong in the first half of the year. However, the debt markets tightening led to a decrease in the total volumes of deals. Despite that, valuations of existing private equity portfolio companies held up well, largely due to continued increases in earnings offsetting the compression in valuation multiples.
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