Private equity faces these four challenges in 2023

Frankfurt Hardly any branch of the global financial industry has grown as quickly as private equity in recent decades. According to the data provider Preqin, the uninvested capital of these funds alone, which buy, restructure or further develop and resell companies and parts of groups, was 1.7 trillion dollars.

Private equity funds have become major players in the mergers and acquisitions (M&A) market, accounting for 25 to 37 percent of transaction volume in recent years. But the crisis year 2022 put an end to this boom for the time being.

According to the data provider Refinitiv, however, the proportion of financial investors in the German M&A business in 2022 was well below the average at 20 percent and globally at 22 percent, which was also significantly weaker. An indication that the investment managers who are used to success are getting into trouble. Rising interest rates make large loans less attractive. In the portfolios of the funds themselves there are also more and more companies in need of restructuring.