Despite choppy economic waters, deal-making remains a viable opportunity for private equity (PE) investors. By staying informed and taking advantage of market conditions, savvy PE professionals can identify attractive investment targets to potentiate their return on capital. Now may be the right time for your business to weather the storm and make smart investments.
Here are three trends dealmakers must be aware of as they navigate the shifting hunting ground for investment targets.
First, the debt markets remain open. Despite the turbulence in public markets and investor sentiment, companies are still able to access capital at a number of lenders’ doors. That means private equity funds have a wide range of both traditional and non-traditional sources to finance their deals.
Second, inflation is driving up prices for some sectors more than others. With higher costs across segments like healthcare, technology and consumer products, many companies find themselves needing an influx of capital just to meet existing obligations or pursue growth strategies. This presents PE investors with opportunities to infuse cash into businesses in exchange for ownership stakes.
Third, there are M&A activity arbitrage opportunities compared to 2018 levels where investors can buy “cheap” using a combination of debt and equity. And while the overall landscape is full of uncertainty, savvy PE investors can take advantage of short-term mispricings in certain markets to find undervalued businesses.
Overall, the current economic environment presents unique opportunities for those willing to take calculated risks. With a well-researched strategy and access to capital, private equity investors have a chance to generate significant returns on their investments in 2023.
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