- Private Equity Principal and Sector Specialist
Italy, Institutional
ChangeThe views expressed are those of the author at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.
The times they are a-changin’. The late-stage private equity market is digesting a public growth multiple collapse that took us from boom to bust in four months. But while valuations may be coming down in the private market as a result, the opportunity-creating trends of technology disrupting all parts of the economy and companies staying private longer remain in place.
A changed valuation environment
The recent inflated valuation environment has finally corrected in a number of areas. For example, consider the software-as-a-service (SaaS) sector of the public market which is now back to the multiples of 2019 (Figure 1).
Figure 1
But how is this public market correction impacting the late-stage private world? We’ve seen prices in some of the most richly valued areas fall significantly, leaving valuations of some prominent private SaaS companies, for instance, looking quite different than they did just a few months ago.
The public market correction is also causing a slowdown in late-stage deal activity. Don’t get us wrong, activity levels remain near all-time highs, but things are tapering off. Looking at first-quarter industry data, venture capital activity as a whole dropped 19% quarter-over-quarter. The number of US$100M+ financings has also fallen each month since reaching a fever pitch in November of last year (Figure 2).
Figure 2
It’s worth noting there is a lag effect in data like this: Companies often wait a month or longer from signing a term sheet to ultimately taking capital in and announcing the raise. So, it is likely that much of the late-stage deal activity announced in the first quarter was actually struck at the end of last year. Our readthrough: The Q2 number could be even more depressed than the Q1 number. In our view, there will undoubtedly still be robust deal activity, just not at the frenzied level of 2021.
Bottom line on today’s private equity market
Amid today’s changing valuations and cooling deal activity, the new environment is also beginning to shift the behavior of investors. Many may be regretting getting caught up in the high-valuation craze of recent years and may now be pulling back from the market.
But overall, we may actually be heading into a more normalized environment where private prices come down, allowing disciplined investors to identify companies at more favorable valuations with potentially less competition.
Expert
Related insights
Showing
of
Insights Posts
What the yen carry trade unwind could mean for markets and the Fed
Continue reading
7
min
Article
2025-09-30
URL References
Related Insights
Stay up to date with the latest market insights and our point of view.
Read next
Showing
of
Insights Posts
Investing in “3D”: Forces shaping alternatives opportunities in 2024
Multi-Asset Strategists Adam Berger and Nick Samouilhan offer six ideas from the hedge fund and liquid alternatives investment space, from global macro to multi-strategy approaches.
4
min
Article
2025-06-30
Can hedge funds play the role?
How should investors select the most suitable types of hedge funds for specific roles? Members of our Investment Strategy & Solutions Group offer a simple and intuitive framework that can help.
11
min
Article
2025-03-31
Macro implications of the AI revolution: is the market right?
Macro Strategist John Butler sets out an initial framework to help answer key questions about the potential macro impact of artificial intelligence.
Article
2024-11-30
Long/short investing in European equities' growing dispersion
We explore how growing dispersion in European equity markets is driving opportunities for long/short investors, fueled by structurally higher inflation, changing market leadership, and a renewed focus on valuation.
Article
2024-09-30
Financials amid rising dispersion
We explore why we believe dispersion across stocks, sectors, and geographies is supporting numerous secular themes in long/short investing in financials.
Article
2024-09-30
Time for a new playbook on bonds
Is it time to add to fixed income allocations? Multi-Asset Strategist Adam Berger and Fixed Income Strategist Amar Reganti offer their views, as well as thoughts on specific areas of opportunity.
Article
2024-05-31
Navigating the opportunities and challenges of the energy transition
Two of our climate- and energy-focused investment professionals discuss what the low-carbon transition may look like and how investors can think about the challenges and opportunities it represents.
Article
2024-03-31
Take credit: Our five best credit market ideas for 2023
Fixed Income Strategist Amar Reganti highlights credit market opportunities that he expects to arise over the course of 2023, against a backdrop of slowing growth.
Quick Take
2024-01-31
Fintech market overview: The intersection of disruption and dispersion
In the latest episode of WellSaid, Portfolio Manager Matt Lipton and Global Industry Analyst Matt Ross join host Thomas Mucha to discuss their outlook for fintech in today's environment, exploring the recent pullback in the sector, disruptive fintech innovations, potential regulation, and much more.
Podcast
2023-11-30
Macro renaissance: The opportunity ahead for investors
As the global economy and financial markets transition to a new, potentially more volatile era, macro investment strategies may be well positioned to take advantage of market dislocations and greater asset price differentiation.
Whitepaper
2023-10-31
Mid-2022 Alternative Investments Outlook
As allocators cope with economic uncertainty and market volatility, Multi-Asset Strategist Cara Lafond explains how alternative investments could potentially play a role in improving portfolio resilience and returns.
Continue reading
Article
2023-08-31
URL References
Related Insights