The Future of Private Equity

Private equity has a consistently successful track record of investor returns, such that funds raised from investors in this model are currently at a record high. Western stock markets are suffering as money switches to private funds, whilst public valuations in some sectors have dipped. This chapter questions whether there may be a limit to the circumstances in which the model can be applied. Is there an endless supply of businesses that can be purchased at reasonable prices, improvements made and buyers available to acquire the business? As private equity gains dominance and public markets contract, are exit options reducing? The chapter reviews recent trends that demonstrate private equity to be channelling money into areas which have seen heightened valuations such as software/technology and early-stage businesses. It also reviews how sustainability credentials have also come to influence the private equity approach in recent years. It remains to be seen to what extent these will prove successful. Finally, we consider the impact of inflation, increased interest rates and squeezed liquidity on the fortunes of private equity when there are few buyers, prices are depressed and there are many businesses which need to be sold.